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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Honda Motor Co Ltd was -1.09. The lowest was -3.49. And the median was -2.52.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Honda Motor Co Ltd for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 1.0499||+||0.528 * 0.9854||+||0.404 * 0.9379||+||0.892 * 1.0738||+||0.115 * 1.0271|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0332||+||4.679 * -0.0417||-||0.327 * 0.9894|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $6,796 Mil.|
Revenue was 32057.6749066 + 32953.9662215 + 32390.2766008 + 29738.3401159 = $127,140 Mil.
Gross Profit was 7271.22945287 + 7537.38221505 + 7344.67824358 + 6804.10243762 = $28,957 Mil.
Total Current Assets was $55,687 Mil.
Total Assets was $166,906 Mil.
Property, Plant and Equipment(Net PPE) was $64,120 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,025 Mil.
Selling, General & Admin. Expense(SGA) was $17,481 Mil.
Total Current Liabilities was $48,448 Mil.
Long-Term Debt was $34,307 Mil.
Net Income was 1739.91470197 + 1658.25825883 + -827.438177235 + 1020.98080322 = $3,592 Mil.
Non Operating Income was 375.460655523 + 164.222612242 + 22.8191021653 + 287.737904386 = $850 Mil.
Cash Flow from Operations was 2168.89048704 + 1626.81097171 + 3828.33163762 + 2081.15262877 = $9,705 Mil.
|Accounts Receivable was $6,028 Mil.
Revenue was 30140.2358432 + 29945.0688902 + 29000.618799 + 29314.5261655 = $118,400 Mil.
Gross Profit was 6596.65278374 + 6620.7991361 + 6536.34509882 + 6820.00078778 = $26,574 Mil.
Total Current Assets was $50,454 Mil.
Total Assets was $152,498 Mil.
Property, Plant and Equipment(Net PPE) was $56,160 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,433 Mil.
Selling, General & Admin. Expense(SGA) was $15,756 Mil.
Total Current Liabilities was $42,016 Mil.
Long-Term Debt was $34,408 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(6796.15618519 / 127140.257845)||/||(6027.93563916 / 118400.449698)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(26573.7978064 / 118400.449698)||/||(28957.3923491 / 127140.257845)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (55686.7611213 + 64119.7512779) / 166906.349997)||/||(1 - (50454.3494835 + 56159.631986) / 152498.002457)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(5433.43472102 / (5433.43472102 + 56159.631986))||/||(6024.55120001 / (6024.55120001 + 64119.7512779))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(17481.1629385 / 127140.257845)||/||(15755.855964 / 118400.449698)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((34306.5679088 + 48448.297036) / 166906.349997)||/||((34407.8699866 + 42015.7289867) / 152498.002457)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(3591.71558679 - 850.240274316||-||9705.18572514)||/||166906.349997|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Honda Motor Co Ltd has a M-score of -2.60 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Honda Motor Co Ltd Annual Data
Honda Motor Co Ltd Quarterly Data