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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 -2.62.
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 * 0.9991||+||0.528 * 0.9906||+||0.404 * 0.9771||+||0.892 * 0.9582||+||0.115 * 0.9624|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0804||+||4.679 * -0.0376||-||0.327 * 1.0812|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $278 Mil.|
Revenue was 1824.392 + 1672.945 + 1200.157 + 1301.604 = $5,999 Mil.
Gross Profit was 779.635 + 714.114 + 438.48 + 525.505 = $2,458 Mil.
Total Current Assets was $4,696 Mil.
Total Assets was $10,565 Mil.
Property, Plant and Equipment(Net PPE) was $873 Mil.
Depreciation, Depletion and Amortization(DDA) was $194 Mil.
Selling, General & Admin. Expense(SGA) was $1,177 Mil.
Total Current Liabilities was $2,523 Mil.
Long-Term Debt was $4,560 Mil.
Net Income was 299.81 + 269.854 + 74.475 + 150.066 = $794 Mil.
Non Operating Income was 1.45 + 0 + 0 + 0 = $1 Mil.
Cash Flow from Operations was 439.244 + 174.7 + 179.809 + 396.276 = $1,190 Mil.
|Accounts Receivable was $290 Mil.
Revenue was 2000.699 + 1726.048 + 1190.634 + 1343.718 = $6,261 Mil.
Gross Profit was 849.812 + 707.634 + 443.6 + 539.805 = $2,541 Mil.
Total Current Assets was $4,374 Mil.
Total Assets was $10,076 Mil.
Property, Plant and Equipment(Net PPE) was $826 Mil.
Depreciation, Depletion and Amortization(DDA) was $176 Mil.
Selling, General & Admin. Expense(SGA) was $1,137 Mil.
Total Current Liabilities was $2,454 Mil.
Long-Term Debt was $3,794 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)|
|=||(277.569 / 5999.098)||/||(289.94 / 6261.099)|
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)|
|=||(714.114 / 6261.099)||/||(779.635 / 5999.098)|
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 - (4696.39 + 873.007) / 10564.872)||/||(1 - (4373.698 + 826.467) / 10076.296)|
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))|
|=||(175.53 / (175.53 + 826.467))||/||(194.259 / (194.259 + 873.007))|
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)|
|=||(1176.618 / 5999.098)||/||(1136.578 / 6261.099)|
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)|
|=||((4560.349 + 2522.724) / 10564.872)||/||((3794.396 + 2453.648) / 10076.296)|
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|
|=||(794.205 - 1.45||-||1190.029)||/||10564.872|
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 -2.75 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