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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 Hovnanian Enterprises Inc was 2.23. The lowest was -81.56. And the median was -2.16.
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 * 1.0811||+||0.404 * 1.0261||+||0.892 * 1.1976||+||0.115 * 0.9965|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8321||+||4.679 * -0.2134||-||0.327 * 1.0736|
|This Year (Jan17) TTM:||Last Year (Jan16) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 552.009 + 805.069 + 716.85 + 654.723 = $2,729 Mil.
Gross Profit was 78.621 + 112.06 + 94.18 + 77.942 = $363 Mil.
Total Current Assets was $1,491 Mil.
Total Assets was $2,145 Mil.
Property, Plant and Equipment(Net PPE) was $50 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $249 Mil.
Total Current Liabilities was $568 Mil.
Long-Term Debt was $1,620 Mil.
Net Income was -0.143 + 22.289 + -0.474 + -8.461 = $13 Mil.
Non Operating Income was 4.393 + -7.193 + -2.401 + -2.493 = $-8 Mil.
Cash Flow from Operations was 25.916 + 193.109 + 225.743 + 33.894 = $479 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 575.605 + 693.204 + 540.613 + 468.949 = $2,278 Mil.
Gross Profit was 74.72 + 107.454 + 82.344 + 62.978 = $327 Mil.
Total Current Assets was $1,806 Mil.
Total Assets was $2,553 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $250 Mil.
Total Current Liabilities was $703 Mil.
Long-Term Debt was $1,722 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 / 2728.651)||/||(0 / 2278.371)|
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)|
|=||(327.496 / 2278.371)||/||(362.803 / 2728.651)|
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 - (1491.042 + 49.998) / 2145.296)||/||(1 - (1805.975 + 46.01) / 2552.74)|
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))|
|=||(3.404 / (3.404 + 46.01))||/||(3.713 / (3.713 + 49.998))|
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)|
|=||(249.318 / 2728.651)||/||(250.18 / 2278.371)|
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)|
|=||((1619.673 + 567.533) / 2145.296)||/||((1721.527 + 702.772) / 2552.74)|
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|
|=||(13.211 - -7.694||-||478.662)||/||2145.296|
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 -3.24 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
Hovnanian Enterprises Inc Annual Data
Hovnanian Enterprises Inc Quarterly Data