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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 Hewlett-Packard Co 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 Hewlett-Packard Co 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 * 0.9274||+||0.528 * 0.9655||+||0.404 * 1.0063||+||0.892 * 0.9826||+||0.115 * 1.0381|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0206||+||4.679 * -0.0509||-||0.327 * 0.9821|
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $12,295 Mil.|
Revenue was 26839 + 28406 + 27585 + 27309 = $110,139 Mil.
Gross Profit was 6268 + 6981 + 6611 + 6605 = $26,465 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 $13,214 Mil.
Total Current Liabilities was $42,529 Mil.
Long-Term Debt was $15,552 Mil.
Net Income was 1366 + 1330 + 985 + 1273 = $4,954 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 744 + 2701 + 3647 + 2995 = $10,087 Mil.
|Accounts Receivable was $13,492 Mil.
Revenue was 28154 + 29131 + 27226 + 27582 = $112,093 Mil.
Gross Profit was 6418 + 6694 + 6367 + 6527 = $26,006 Mil.
Total Current Assets was $50,684 Mil.
Total Assets was $105,025 Mil.
Property, Plant and Equipment(Net PPE) was $11,259 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,565 Mil.
Selling, General & Admin. Expense(SGA) was $13,177 Mil.
Total Current Liabilities was $43,611 Mil.
Long-Term Debt was $17,971 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)|
|=||(12295 / 110139)||/||(13492 / 112093)|
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)|
|=||(6981 / 112093)||/||(6268 / 110139)|
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 - (48198 + 11030) / 100861)||/||(1 - (50684 + 11259) / 105025)|
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))|
|=||(4565 / (4565 + 11259))||/||(4245 / (4245 + 11030))|
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)|
|=||(13214 / 110139)||/||(13177 / 112093)|
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)|
|=||((15552 + 42529) / 100861)||/||((17971 + 43611) / 105025)|
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|
|=||(4954 - 0||-||10087)||/||100861|
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.
Hewlett-Packard Co has a M-score of -2.81 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
Hewlett-Packard Co Annual Data
Hewlett-Packard Co Quarterly Data