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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 -2.61.
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|
|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
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)|
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)|
|=||(6351 / 97158)||/||(2285 / 88762)|
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 - (15155 + 1529) / 25517)||/||(1 - (48198 + 11030) / 100861)|
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))|
|=||(4245 / (4245 + 11030))||/||(3112 / (3112 + 1529))|
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)|
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)|
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|
|=||(3780 - -426||-||5638)||/||25517|
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.
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