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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 * 0.3486||+||0.528 * 1.0069||+||0.404 * 0.82||+||0.892 * 0.9043||+||0.115 * 0.4707|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9924||+||4.679 * -0.0754||-||0.327 * 1.5965|
|This Year (Apr16) TTM:||Last Year (Apr15) TTM:|
|Accounts Receivable was $3,884 Mil.|
Revenue was 11588 + 12246 + 25714 + 25349 = $74,897 Mil.
Gross Profit was 2250 + 2285 + 6351 + 6032 = $16,918 Mil.
Total Current Assets was $15,385 Mil.
Total Assets was $25,523 Mil.
Property, Plant and Equipment(Net PPE) was $1,572 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,194 Mil.
Selling, General & Admin. Expense(SGA) was $8,258 Mil.
Total Current Liabilities was $16,862 Mil.
Long-Term Debt was $6,708 Mil.
Net Income was 629 + 592 + 1323 + 854 = $3,398 Mil.
Non Operating Income was 0 + 0 + -318 + -108 = $-426 Mil.
Cash Flow from Operations was 1575 + -108 + 2609 + 1673 = $5,749 Mil.
|Accounts Receivable was $12,320 Mil.
Revenue was 12977 + 13858 + 28406 + 27585 = $82,826 Mil.
Gross Profit was 2562 + 2685 + 6981 + 6611 = $18,839 Mil.
Total Current Assets was $48,883 Mil.
Total Assets was $101,396 Mil.
Property, Plant and Equipment(Net PPE) was $11,014 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,161 Mil.
Selling, General & Admin. Expense(SGA) was $9,202 Mil.
Total Current Liabilities was $43,186 Mil.
Long-Term Debt was $15,464 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)|
|=||(3884 / 74897)||/||(12320 / 82826)|
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)|
|=||(18839 / 82826)||/||(16918 / 74897)|
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 - (15385 + 1572) / 25523)||/||(1 - (48883 + 11014) / 101396)|
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))|
|=||(4161 / (4161 + 11014))||/||(2194 / (2194 + 1572))|
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)|
|=||(8258 / 74897)||/||(9202 / 82826)|
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)|
|=||((6708 + 16862) / 25523)||/||((15464 + 43186) / 101396)|
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|
|=||(3398 - -426||-||5749)||/||25523|
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 -3.84 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