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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 Harley-Davidson Inc was -1.47. The lowest was -3.67. And the median was -2.70.
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 Harley-Davidson 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 * 0.8985||+||0.528 * 0.8175||+||0.404 * 1.2042||+||0.892 * 1.0557||+||0.115 * 0.1655|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.859||+||4.679 * -0.0322||-||0.327 * 1.0245|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $248 Mil.|
Revenue was 1200.157 + 1301.604 + 2000.699 + 1726.048 = $6,229 Mil.
Gross Profit was 1093.598 + 472.359 + 798.578 + 655.321 = $3,020 Mil.
Total Current Assets was $3,948 Mil.
Total Assets was $9,528 Mil.
Property, Plant and Equipment(Net PPE) was $0 Mil.
Depreciation, Depletion and Amortization(DDA) was $131 Mil.
Selling, General & Admin. Expense(SGA) was $1,022 Mil.
Total Current Liabilities was $2,389 Mil.
Long-Term Debt was $3,762 Mil.
Net Income was 74.475 + 150.066 + 354.153 + 265.917 = $845 Mil.
Non Operating Income was 1.559 + 1.509 + 0 + 1.659 = $5 Mil.
Cash Flow from Operations was 179.809 + 396.276 + 367.006 + 203.586 = $1,147 Mil.
|Accounts Receivable was $261 Mil.
Revenue was 1190.634 + 1343.718 + 1794.307 + 1571.213 = $5,900 Mil.
Gross Profit was 443.6 + 539.805 + 719.205 + 635.853 = $2,338 Mil.
Total Current Assets was $3,989 Mil.
Total Assets was $9,405 Mil.
Property, Plant and Equipment(Net PPE) was $842 Mil.
Depreciation, Depletion and Amortization(DDA) was $167 Mil.
Selling, General & Admin. Expense(SGA) was $1,127 Mil.
Total Current Liabilities was $2,510 Mil.
Long-Term Debt was $3,417 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)|
|=||(247.621 / 6228.508)||/||(261.065 / 5899.872)|
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)|
|=||(472.359 / 5899.872)||/||(1093.598 / 6228.508)|
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 - (3948.095 + 0) / 9528.097)||/||(1 - (3988.803 + 842.477) / 9405.04)|
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))|
|=||(167.072 / (167.072 + 842.477))||/||(130.688 / (130.688 + 0))|
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)|
|=||(1021.933 / 6228.508)||/||(1126.884 / 5899.872)|
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)|
|=||((3761.528 + 2389.286) / 9528.097)||/||((3416.713 + 2509.586) / 9405.04)|
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|
|=||(844.611 - 4.727||-||1146.677)||/||9528.097|
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.
Harley-Davidson Inc has a M-score of -2.77 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
Harley-Davidson Inc Annual Data
Harley-Davidson Inc Quarterly Data