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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.
Health Net Inc has a M-score of -2.53 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Health Net Inc was 4.62. The lowest was -4.34. 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 * 1.3643||+||0.528 * 0.8811||+||0.404 * 0.7968||+||0.892 * 1.074||+||0.115 * 0.997|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0802||+||4.679 * -0.0611||-||0.327 * 1.0333|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $1,226 Mil.|
Revenue was 3421.392 + 3038.935 + 2743.244 + 2775.031 = $11,979 Mil.
Gross Profit was 525.005 + 504.619 + 389.203 + 453.136 = $1,872 Mil.
Total Current Assets was $3,839 Mil.
Total Assets was $4,777 Mil.
Property, Plant and Equipment(Net PPE) was $209 Mil.
Depreciation, Depletion and Amortization(DDA) was $39 Mil.
Selling, General & Admin. Expense(SGA) was $1,504 Mil.
Total Current Liabilities was $2,210 Mil.
Long-Term Debt was $499 Mil.
Net Income was 120.867 + 28.787 + 19.753 + 66.84 = $236 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -13.75 + 311.458 + -71.886 + 302.195 = $528 Mil.
|Accounts Receivable was $837 Mil.
Revenue was 2738.431 + 2797.037 + 2837.782 + 2779.572 = $11,153 Mil.
Gross Profit was 419.113 + 402.826 + 367.428 + 346.369 = $1,536 Mil.
Total Current Assets was $2,948 Mil.
Total Assets was $3,881 Mil.
Property, Plant and Equipment(Net PPE) was $190 Mil.
Depreciation, Depletion and Amortization(DDA) was $35 Mil.
Selling, General & Admin. Expense(SGA) was $1,296 Mil.
Total Current Liabilities was $1,606 Mil.
Long-Term Debt was $524 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)|
|=||(1225.927 / 11978.602)||/||(836.657 / 11152.822)|
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)|
|=||(504.619 / 11152.822)||/||(525.005 / 11978.602)|
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 - (3839.138 + 209.385) / 4777.025)||/||(1 - (2948.138 + 190.394) / 3881.453)|
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))|
|=||(35.284 / (35.284 + 190.394))||/||(38.94 / (38.94 + 209.385))|
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)|
|=||(1504.031 / 11978.602)||/||(1296.322 / 11152.822)|
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)|
|=||((499.402 + 2209.771) / 4777.025)||/||((524.197 + 1606.169) / 3881.453)|
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|
|=||(236.247 - 0||-||528.017)||/||4777.025|
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 -2.53 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
Health Net Inc Annual Data
Health Net Inc Quarterly Data