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HP Inc (NYSE:HPQ)
Beneish M-Score
-3.73 (As of Today)

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.

HP Inc has a M-score of -3.73 suggests that the company is not a manipulator.

HPQ' s Beneish M-Score Range Over the Past 10 Years
Min: -3.89   Max: -1.51
Current: -3.73

-3.89
-1.51

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 -2.61.


Definition

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 * 0.3663+0.528 * 1.0062+0.404 * 0.8386+0.892 * 0.9136+0.115 * 0.4144
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9938+4.679 * -0.0561-0.327 * 1.5955
=-3.73

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jan16) TTM:Last Year (Jan15) TTM:
Accounts Receivable was $4,114 Mil.
Revenue was 12246 + 25714 + 25349 + 25453 = $88,762 Mil.
Gross Profit was 2285 + 6351 + 6032 + 6108 = $20,776 Mil.
Total Current Assets was $15,155 Mil.
Total Assets was $25,517 Mil.
Property, Plant and Equipment(Net PPE) was $1,529 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,112 Mil.
Selling, General & Admin. Expense(SGA) was $10,319 Mil.
Total Current Liabilities was $16,761 Mil.
Long-Term Debt was $6,683 Mil.
Net Income was 592 + 1323 + 854 + 1011 = $3,780 Mil.
Non Operating Income was 0 + -318 + -108 + 0 = $-426 Mil.
Cash Flow from Operations was -108 + 2609 + 1673 + 1464 = $5,638 Mil.
Accounts Receivable was $12,295 Mil.
Revenue was 13858 + 28406 + 27585 + 27309 = $97,158 Mil.
Gross Profit was 2685 + 6981 + 6611 + 6605 = $22,882 Mil.
Total Current Assets was $48,198 Mil.
Total Assets was $100,861 Mil.
Property, Plant and Equipment(Net PPE) was $11,030 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,245 Mil.
Selling, General & Admin. Expense(SGA) was $11,365 Mil.
Total Current Liabilities was $42,529 Mil.
Long-Term Debt was $15,552 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(4114 / 88762) / (12295 / 97158)
=0.04634866 / 0.12654645
=0.3663

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(6351 / 97158) / (2285 / 88762)
=0.23551329 / 0.23406413
=1.0062

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (15155 + 1529) / 25517) / (1 - (48198 + 11030) / 100861)
=0.34616138 / 0.412776
=0.8386

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=88762 / 97158
=0.9136

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))
=(4245 / (4245 + 11030)) / (3112 / (3112 + 1529))
=0.27790507 / 0.67054514
=0.4144

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)
=(10319 / 88762) / (11365 / 97158)
=0.1162547 / 0.11697441
=0.9938

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)
=((6683 + 16761) / 25517) / ((15552 + 42529) / 100861)
=0.91876004 / 0.57585192
=1.5955

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(3780 - -426 - 5638) / 25517
=-0.0561

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 -3.73 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

HP Inc Annual Data

Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15
DSRI 1.03851.08481.11141.00941.01580.97670.95181.03710.87781.0418
GMI 0.96330.99590.99721.03520.99311.01741.00481.0070.96650.9968
AQI 0.91991.1531.1860.99171.05871.08680.83060.97740.97421.0185
SGI 1.05721.13781.1350.96781.10021.00960.94590.9330.99250.9273
DEPI 1.04390.99131.08930.79431.02411.00750.96541.04181.03741.0316
SGAI 0.95280.95380.94430.91570.9851.05981.05991.05331.01410.9976
LVGI 1.03751.06691.07190.92811.04631.08521.11670.93410.98511.0334
TATA -0.0632-0.0267-0.0594-0.0498-0.0254-0.043-0.2135-0.0615-0.0709-0.0181
M-score -2.74-2.36-2.47-2.70-2.48-2.69-3.69-2.78-2.95-2.59

HP Inc Quarterly Data

Oct13Jan14Apr14Jul14Oct14Jan15Apr15Jul15Oct15Jan16
DSRI 1.03711.00341.0110.99870.87781.05141.01171.08271.19140.3663
GMI 1.0071.00160.99980.99710.96650.98510.99311.00171.01911.0062
AQI 0.97740.96280.96620.97790.97421.00630.99570.99931.01850.8386
SGI 0.9330.94450.96760.99160.99250.86680.85230.82960.81090.9136
DEPI 1.04181.03211.04781.05761.03741.03811.03241.01661.03160.4144
SGAI 1.05331.03861.03281.02361.01410.99510.97910.96910.97010.9938
LVGI 0.93410.9460.95780.96810.98510.98210.99451.02691.03341.5955
TATA -0.0615-0.0641-0.0574-0.0698-0.0681-0.048-0.0352-0.0165-0.0141-0.0561
M-score -2.78-2.83-2.77-2.81-2.94-2.77-2.76-2.63-2.52-3.73
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