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Beneish M-Score -0.69 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 2.27. The lowest was -81.56. And the median was -2.23.
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 * 1.1017||+||0.404 * 2.1151||+||0.892 * 1.1486||+||0.115 * 1.0501|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9555||+||4.679 * 0.2304||-||0.327 * 0.8051|
|This Year (Apr15) TTM:||Last Year (Apr14) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 468.949 + 445.714 + 698.394 + 551.009 = $2,164 Mil.
Gross Profit was 62.978 + 70.037 + 127.121 + 110.296 = $370 Mil.
Total Current Assets was $1,824 Mil.
Total Assets was $2,517 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $266 Mil.
Total Current Liabilities was $624 Mil.
Long-Term Debt was $1,908 Mil.
Net Income was -19.559 + -14.376 + 322.464 + 17.105 = $306 Mil.
Non Operating Income was -0.322 + -0.092 + -5.275 + -8.09 = $-14 Mil.
Cash Flow from Operations was -60.512 + -195.617 + 68.958 + -73.437 = $-261 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 449.929 + 364.048 + 591.687 + 478.357 = $1,884 Mil.
Gross Profit was 79.86 + 58.335 + 123.6 + 93.513 = $355 Mil.
Total Current Assets was $1,570 Mil.
Total Assets was $1,839 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $242 Mil.
Total Current Liabilities was $592 Mil.
Long-Term Debt was $1,706 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 / 2164.066)||/||(0 / 1884.021)|
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)|
|=||(70.037 / 1884.021)||/||(62.978 / 2164.066)|
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 - (1823.932 + 46.414) / 2516.994)||/||(1 - (1569.586 + 45.884) / 1838.823)|
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))|
|=||(3.574 / (3.574 + 45.884))||/||(3.43 / (3.43 + 46.414))|
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)|
|=||(265.772 / 2164.066)||/||(242.166 / 1884.021)|
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)|
|=||((1908.38 + 623.97) / 2516.994)||/||((1706.172 + 591.741) / 1838.823)|
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|
|=||(305.634 - -13.779||-||-260.608)||/||2516.994|
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 -0.69 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