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Beneish M-Score -0.68 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 -2.24.
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 * 1.028||+||0.404 * 2.1058||+||0.892 * 1.1551||+||0.115 * 1.2174|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9701||+||4.679 * 0.2385||-||0.327 * 0.8286|
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 445.714 + 698.394 + 551.009 + 449.929 = $2,145 Mil.
Gross Profit was 70.037 + 127.121 + 110.296 + 79.86 = $387 Mil.
Total Current Assets was $1,780 Mil.
Total Assets was $2,461 Mil.
Property, Plant and Equipment(Net PPE) was $47 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $259 Mil.
Total Current Liabilities was $653 Mil.
Long-Term Debt was $1,907 Mil.
Net Income was -14.376 + 322.464 + 17.105 + -7.902 = $317 Mil.
Non Operating Income was -0.092 + -5.275 + -8.09 + -1.239 = $-15 Mil.
Cash Flow from Operations was -195.617 + 68.958 + -73.437 + -55.054 = $-255 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 364.048 + 591.687 + 478.357 + 422.998 = $1,857 Mil.
Gross Profit was 58.335 + 123.6 + 93.513 + 69.253 = $345 Mil.
Total Current Assets was $1,523 Mil.
Total Assets was $1,787 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $231 Mil.
Total Current Liabilities was $450 Mil.
Long-Term Debt was $1,794 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)|
|=||(0 / 2145.046)||/||(0 / 1857.09)|
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)|
|=||(127.121 / 1857.09)||/||(70.037 / 2145.046)|
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 - (1779.763 + 46.967) / 2461.435)||/||(1 - (1522.76 + 45.647) / 1787.261)|
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))|
|=||(4.103 / (4.103 + 45.647))||/||(3.413 / (3.413 + 46.967))|
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)|
|=||(259.112 / 2145.046)||/||(231.246 / 1857.09)|
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)|
|=||((1906.929 + 653.278) / 2461.435)||/||((1793.512 + 449.873) / 1787.261)|
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|
|=||(317.291 - -14.696||-||-255.15)||/||2461.435|
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 -0.68 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