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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 HP Inc was -1.51. The lowest was -3.89. 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 HP 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 * 0.2127||+||0.528 * 0.9||+||0.404 * 0.7339||+||0.892 * 1.4775||+||0.115 * 0.621|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1428||+||4.679 * -0.0638||-||0.327 * 1.54|
|This Year (Jul16) TTM:||Last Year (Jul15) TTM:|
|Accounts Receivable was $4,008 Mil.|
Revenue was 11892 + 11588 + 12246 + 64158 = $99,884 Mil.
Gross Profit was 2172 + 2250 + 2285 + 17186 = $23,893 Mil.
Total Current Assets was $17,402 Mil.
Total Assets was $27,224 Mil.
Property, Plant and Equipment(Net PPE) was $1,607 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,256 Mil.
Selling, General & Admin. Expense(SGA) was $11,603 Mil.
Total Current Liabilities was $18,114 Mil.
Long-Term Debt was $6,760 Mil.
Net Income was 783 + 629 + 592 + 1323 = $3,327 Mil.
Non Operating Income was -36 + 0 + 0 + -42 = $-78 Mil.
Cash Flow from Operations was 1065 + 1575 + -108 + 2609 = $5,141 Mil.
|Accounts Receivable was $12,753 Mil.
Revenue was 12362 + 12977 + 13858 + 28406 = $67,603 Mil.
Gross Profit was 2326 + 2562 + 2685 + 6981 = $14,554 Mil.
Total Current Assets was $51,998 Mil.
Total Assets was $107,033 Mil.
Property, Plant and Equipment(Net PPE) was $11,028 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,129 Mil.
Selling, General & Admin. Expense(SGA) was $6,872 Mil.
Total Current Liabilities was $49,033 Mil.
Long-Term Debt was $14,468 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)|
|=||(4008 / 99884)||/||(12753 / 67603)|
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)|
|=||(14554 / 67603)||/||(23893 / 99884)|
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 - (17402 + 1607) / 27224)||/||(1 - (51998 + 11028) / 107033)|
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))|
|=||(4129 / (4129 + 11028))||/||(1256 / (1256 + 1607))|
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)|
|=||(11603 / 99884)||/||(6872 / 67603)|
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)|
|=||((6760 + 18114) / 27224)||/||((14468 + 49033) / 107033)|
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|
|=||(3327 - -78||-||5141)||/||27224|
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.
HP Inc has a M-score of -3.48 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
HP Inc Annual Data
HP Inc Quarterly Data