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Beneish M-Score -0.96 higher than -2.22, which implies that it might have manipulated its financial results.
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 Hovnanian Enterprises Inc was -0.44. The lowest was -13.88. And the median was -2.12.
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 Hovnanian Enterprises 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||+||0.528 * 1.0055||+||0.404 * 1.7092||+||0.892 * 1.1146||+||0.115 * 1.3584|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0388||+||4.679 * 0.2226||-||0.327 * 0.8447|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 698.394 + 551.009 + 449.929 + 364.048 = $2,063 Mil.
Gross Profit was 127.121 + 110.296 + 79.86 + 65.007 = $382 Mil.
Total Current Assets was $1,636 Mil.
Total Assets was $2,290 Mil.
Property, Plant and Equipment(Net PPE) was $47 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $255 Mil.
Total Current Liabilities was $718 Mil.
Long-Term Debt was $1,658 Mil.
Net Income was 322.464 + 17.105 + -7.902 + -24.523 = $307 Mil.
Non Operating Income was -5.275 + -8.09 + -1.239 + 2.571 = $-12 Mil.
Cash Flow from Operations was 68.958 + -73.437 + -55.054 + -131.052 = $-191 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 591.687 + 478.357 + 422.998 + 358.211 = $1,851 Mil.
Gross Profit was 123.6 + 93.513 + 69.253 + 58.511 = $345 Mil.
Total Current Assets was $1,440 Mil.
Total Assets was $1,759 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $5 Mil.
Selling, General & Admin. Expense(SGA) was $220 Mil.
Total Current Liabilities was $631 Mil.
Long-Term Debt was $1,529 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)|
|=||(0 / 2063.38)||/||(0 / 1851.253)|
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)|
|=||(110.296 / 1851.253)||/||(127.121 / 2063.38)|
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 - (1635.53 + 46.744) / 2289.93)||/||(1 - (1439.811 + 46.211) / 1759.13)|
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))|
|=||(4.712 / (4.712 + 46.211))||/||(3.417 / (3.417 + 46.744))|
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)|
|=||(254.912 / 2063.38)||/||(220.166 / 1851.253)|
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)|
|=||((1657.557 + 717.95) / 2289.93)||/||((1529.445 + 630.922) / 1759.13)|
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|
|=||(307.144 - -12.033||-||-190.585)||/||2289.93|
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.
Hovnanian Enterprises Inc has a M-score of -0.96 signals that the company is likely to 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
Hovnanian Enterprises Inc Annual Data
Hovnanian Enterprises Inc Quarterly Data