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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 Health Net Inc was -0.22. The lowest was -4.16. And the median was -2.45.
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 Health Net Inc 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 * 1.5333||+||0.528 * 0.9657||+||0.404 * 0.9828||+||0.892 * 1.1595||+||0.115 * 1.9529|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9915||+||4.679 * -0.0401||-||0.327 * 1.0461|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $268 Mil.|
Revenue was 4036.401 + 4153.667 + 4163.623 + 3889.896 = $16,244 Mil.
Gross Profit was 654.47 + 677.128 + 662.619 + 604.493 = $2,599 Mil.
Total Current Assets was $5,324 Mil.
Total Assets was $6,398 Mil.
Property, Plant and Equipment(Net PPE) was $146 Mil.
Depreciation, Depletion and Amortization(DDA) was $23 Mil.
Selling, General & Admin. Expense(SGA) was $2,086 Mil.
Total Current Liabilities was $3,872 Mil.
Long-Term Debt was $400 Mil.
Net Income was 37.068 + 60.253 + 58.368 + 29.988 = $186 Mil.
Non Operating Income was 41.696 + -13.915 + -16.424 + 0 = $11 Mil.
Cash Flow from Operations was -138.567 + -30.681 + -260.275 + 860.618 = $431 Mil.
|Accounts Receivable was $151 Mil.
Revenue was 3758.389 + 3789.87 + 3421.392 + 3038.935 = $14,009 Mil.
Gross Profit was 573.111 + 561.457 + 525.005 + 504.619 = $2,164 Mil.
Total Current Assets was $4,516 Mil.
Total Assets was $5,396 Mil.
Property, Plant and Equipment(Net PPE) was $84 Mil.
Depreciation, Depletion and Amortization(DDA) was $30 Mil.
Selling, General & Admin. Expense(SGA) was $1,815 Mil.
Total Current Liabilities was $2,945 Mil.
Long-Term Debt was $500 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)|
|=||(267.655 / 16243.587)||/||(150.546 / 14008.586)|
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)|
|=||(677.128 / 14008.586)||/||(654.47 / 16243.587)|
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 - (5324.043 + 146.053) / 6397.646)||/||(1 - (4515.617 + 84.328) / 5395.934)|
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))|
|=||(29.786 / (29.786 + 84.328))||/||(22.533 / (22.533 + 146.053))|
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)|
|=||(2086.34 / 16243.587)||/||(1814.702 / 14008.586)|
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)|
|=||((399.709 + 3871.91) / 6397.646)||/||((499.504 + 2944.503) / 5395.934)|
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|
|=||(185.677 - 11.357||-||431.095)||/||6397.646|
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.
Health Net Inc has a M-score of -1.96 signals that the company is likely to 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
Health Net Inc Annual Data
Health Net Inc Quarterly Data