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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 -0.89. The lowest was -3.67. And the median was -2.64.
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 * 1.0621||+||0.528 * 0.9925||+||0.404 * 0.9794||+||0.892 * 0.9672||+||0.115 * 0.9868|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0701||+||4.679 * -0.0388||-||0.327 * 1.148|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $294 Mil.|
Revenue was 1317.43 + 1824.392 + 1672.945 + 1200.157 = $6,015 Mil.
Gross Profit was 529.934 + 779.635 + 714.114 + 438.48 = $2,462 Mil.
Total Current Assets was $4,616 Mil.
Total Assets was $10,732 Mil.
Property, Plant and Equipment(Net PPE) was $878 Mil.
Depreciation, Depletion and Amortization(DDA) was $199 Mil.
Selling, General & Admin. Expense(SGA) was $1,184 Mil.
Total Current Liabilities was $2,663 Mil.
Long-Term Debt was $5,054 Mil.
Net Income was 140.347 + 299.81 + 269.854 + 74.475 = $784 Mil.
Non Operating Income was 3.211 + 1.45 + 0 + -4.94 = $-0 Mil.
Cash Flow from Operations was 407.013 + 439.244 + 174.7 + 179.809 = $1,201 Mil.
|Accounts Receivable was $286 Mil.
Revenue was 1301.604 + 2000.699 + 1726.048 + 1190.634 = $6,219 Mil.
Gross Profit was 525.505 + 849.812 + 707.634 + 443.6 = $2,527 Mil.
Total Current Assets was $4,202 Mil.
Total Assets was $10,026 Mil.
Property, Plant and Equipment(Net PPE) was $827 Mil.
Depreciation, Depletion and Amortization(DDA) was $184 Mil.
Selling, General & Admin. Expense(SGA) was $1,143 Mil.
Total Current Liabilities was $2,707 Mil.
Long-Term Debt was $3,573 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)|
|=||(294.054 / 6014.924)||/||(286.256 / 6218.985)|
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)|
|=||(779.635 / 6218.985)||/||(529.934 / 6014.924)|
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 - (4616.041 + 877.787) / 10731.558)||/||(1 - (4202.478 + 826.764) / 10025.506)|
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))|
|=||(184.478 / (184.478 + 826.764))||/||(199.078 / (199.078 + 877.787))|
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)|
|=||(1183.548 / 6014.924)||/||(1143.497 / 6218.985)|
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)|
|=||((5054.347 + 2663.005) / 10731.558)||/||((3573.118 + 2707.044) / 10025.506)|
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|
|=||(784.486 - -0.279||-||1200.766)||/||10731.558|
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 -2.71 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