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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 -2.52.
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 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 * 0.6122||+||0.528 * 0.9746||+||0.404 * 0.7175||+||0.892 * 1.2673||+||0.115 * 0.616|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0822||+||4.679 * -0.1168||-||0.327 * 1.2077|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|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.
Net Income was 4.914 + -8.939 + 120.867 + 28.787 = $146 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -109.662 + 587.955 + -13.75 + 311.458 = $776 Mil.
|Accounts Receivable was $194 Mil.
Revenue was 2743.244 + 2775.031 + 2738.431 + 2797.037 = $11,054 Mil.
Gross Profit was 389.203 + 453.136 + 419.113 + 402.826 = $1,664 Mil.
Total Current Assets was $2,920 Mil.
Total Assets was $3,929 Mil.
Property, Plant and Equipment(Net PPE) was $201 Mil.
Depreciation, Depletion and Amortization(DDA) was $39 Mil.
Selling, General & Admin. Expense(SGA) was $1,323 Mil.
Total Current Liabilities was $1,577 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)|
|=||(150.546 / 14008.586)||/||(194.041 / 11053.743)|
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)|
|=||(561.457 / 11053.743)||/||(573.111 / 14008.586)|
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 - (4515.617 + 84.328) / 5395.934)||/||(1 - (2919.89 + 201.395) / 3929.125)|
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))|
|=||(38.589 / (38.589 + 201.395))||/||(29.786 / (29.786 + 84.328))|
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)|
|=||(1814.702 / 14008.586)||/||(1323.122 / 11053.743)|
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)|
|=||((499.504 + 2944.503) / 5395.934)||/||((499.3 + 1577.178) / 3929.125)|
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|
|=||(145.629 - 0||-||776.001)||/||5395.934|
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 -3.40 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