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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 -3.47. And the median was -2.61.
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 * 1.1522||+||0.528 * 1.031||+||0.404 * 1.0088||+||0.892 * 1.0002||+||0.115 * 0.9872|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9976||+||4.679 * -0.0492||-||0.327 * 1.0017|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $285 Mil.|
Revenue was 1110.6 + 1274.813 + 1861.077 + 1749.968 = $5,996 Mil.
Gross Profit was 422.017 + 507.629 + 755.627 + 717.719 = $2,403 Mil.
Total Current Assets was $3,854 Mil.
Total Assets was $9,890 Mil.
Property, Plant and Equipment(Net PPE) was $982 Mil.
Depreciation, Depletion and Amortization(DDA) was $210 Mil.
Selling, General & Admin. Expense(SGA) was $1,217 Mil.
Total Current Liabilities was $2,863 Mil.
Long-Term Debt was $4,667 Mil.
Net Income was 47.179 + 114.065 + 280.431 + 250.489 = $692 Mil.
Non Operating Income was 0.891 + 2.3 + 0.688 + 0.766 = $5 Mil.
Cash Flow from Operations was 246.53 + 471.519 + 415.159 + 41.131 = $1,174 Mil.
|Accounts Receivable was $247 Mil.
Revenue was 1180.635 + 1317.43 + 1824.392 + 1672.945 = $5,995 Mil.
Gross Profit was 453.452 + 529.934 + 779.635 + 714.114 = $2,477 Mil.
Total Current Assets was $3,978 Mil.
Total Assets was $9,973 Mil.
Property, Plant and Equipment(Net PPE) was $942 Mil.
Depreciation, Depletion and Amortization(DDA) was $198 Mil.
Selling, General & Admin. Expense(SGA) was $1,220 Mil.
Total Current Liabilities was $2,747 Mil.
Long-Term Debt was $4,832 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)|
|=||(285.106 / 5996.458)||/||(247.405 / 5995.402)|
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)|
|=||(2477.135 / 5995.402)||/||(2402.992 / 5996.458)|
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 - (3853.852 + 981.593) / 9890.24)||/||(1 - (3977.883 + 942.418) / 9972.977)|
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))|
|=||(198.074 / (198.074 + 942.418))||/||(209.555 / (209.555 + 981.593))|
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)|
|=||(1217.439 / 5996.458)||/||(1220.095 / 5995.402)|
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)|
|=||((4666.975 + 2862.562) / 9890.24)||/||((4832.469 + 2747.307) / 9972.977)|
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|
|=||(692.164 - 4.645||-||1174.339)||/||9890.24|
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 -2.55 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