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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 -0.17. The lowest was -6.02. And the median was -2.53.
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 * 0.8923||+||0.528 * 1.0262||+||0.404 * 0.8782||+||0.892 * 1.3155||+||0.115 * 0.7031|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0062||+||4.679 * -0.2004||-||0.327 * 1.1712|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $529 Mil.|
Revenue was 3889.896 + 3758.389 + 3789.87 + 3421.392 = $14,860 Mil.
Gross Profit was 604.493 + 573.111 + 561.457 + 525.005 = $2,264 Mil.
Total Current Assets was $4,888 Mil.
Total Assets was $5,880 Mil.
Property, Plant and Equipment(Net PPE) was $84 Mil.
Depreciation, Depletion and Amortization(DDA) was $24 Mil.
Selling, General & Admin. Expense(SGA) was $1,912 Mil.
Total Current Liabilities was $3,336 Mil.
Long-Term Debt was $595 Mil.
Net Income was 29.988 + 4.914 + -8.939 + 120.867 = $147 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 860.618 + -109.662 + 587.955 + -13.75 = $1,325 Mil.
|Accounts Receivable was $450 Mil.
Revenue was 3038.935 + 2743.244 + 2775.031 + 2738.431 = $11,296 Mil.
Gross Profit was 504.619 + 389.203 + 453.136 + 419.113 = $1,766 Mil.
Total Current Assets was $3,445 Mil.
Total Assets was $4,431 Mil.
Property, Plant and Equipment(Net PPE) was $206 Mil.
Depreciation, Depletion and Amortization(DDA) was $39 Mil.
Selling, General & Admin. Expense(SGA) was $1,445 Mil.
Total Current Liabilities was $2,029 Mil.
Long-Term Debt was $499 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)|
|=||(528.513 / 14859.547)||/||(450.224 / 11295.641)|
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)|
|=||(573.111 / 11295.641)||/||(604.493 / 14859.547)|
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 - (4888.199 + 84.095) / 5880.03)||/||(1 - (3445.374 + 206.41) / 4430.619)|
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))|
|=||(38.813 / (38.813 + 206.41))||/||(24.43 / (24.43 + 84.095))|
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)|
|=||(1912.071 / 14859.547)||/||(1444.501 / 11295.641)|
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)|
|=||((594.556 + 3335.66) / 5880.03)||/||((499.351 + 2029.189) / 4430.619)|
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|
|=||(146.83 - 0||-||1325.161)||/||5880.03|
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 -3.36 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