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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 -3.04 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Health Net Inc was -0.41. The lowest was -5.64. And the median was -2.50.
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 * 0.8704||+||0.528 * 0.8217||+||0.404 * 0.9543||+||0.892 * 1.0035||+||0.115 * 0.947|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1662||+||4.679 * -0.0608||-||0.327 * 1.0452|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $693 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.
Net Income was 28.787 + 19.753 + 66.84 + 33.483 = $149 Mil.
Non Operating Income was 0 + 0 + 0 + -17.143 = $-17 Mil.
Cash Flow from Operations was 311.458 + -71.886 + 302.195 + -106.285 = $435 Mil.
|Accounts Receivable was $794 Mil.
Revenue was 2797.037 + 2837.782 + 2779.572 + 2841.339 = $11,256 Mil.
Gross Profit was 402.826 + 367.428 + 346.369 + 329.478 = $1,446 Mil.
Total Current Assets was $2,973 Mil.
Total Assets was $3,875 Mil.
Property, Plant and Equipment(Net PPE) was $188 Mil.
Depreciation, Depletion and Amortization(DDA) was $33 Mil.
Selling, General & Admin. Expense(SGA) was $1,234 Mil.
Total Current Liabilities was $1,617 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)|
|=||(693.318 / 11295.641)||/||(793.698 / 11255.73)|
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)|
|=||(389.203 / 11255.73)||/||(504.619 / 11295.641)|
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 - (3445.374 + 206.41) / 4430.619)||/||(1 - (2973.449 + 188.038) / 3875.307)|
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))|
|=||(33.155 / (33.155 + 188.038))||/||(38.813 / (38.813 + 206.41))|
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)|
|=||(1444.501 / 11295.641)||/||(1234.262 / 11255.73)|
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)|
|=||((499.351 + 2029.189) / 4430.619)||/||((499.146 + 1616.879) / 3875.307)|
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|
|=||(148.863 - -17.143||-||435.482)||/||4430.619|
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 -3.04 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