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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 -1.80. The lowest was -3.68. And the median was -2.63.
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 * 0.9096||+||0.528 * 1.0354||+||0.404 * 0.6053||+||0.892 * 0.9373||+||0.115 * 4.5553|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.868||+||4.679 * -0.0294||-||0.327 * 1.9275|
|This Year (Oct16) TTM:||Last Year (Oct15) TTM:|
|Accounts Receivable was $4,114 Mil.|
Revenue was 12512 + 11892 + 11588 + 12246 = $48,238 Mil.
Gross Profit was 2291 + 2172 + 2250 + 2285 = $8,998 Mil.
Total Current Assets was $18,468 Mil.
Total Assets was $29,010 Mil.
Property, Plant and Equipment(Net PPE) was $1,736 Mil.
Depreciation, Depletion and Amortization(DDA) was $332 Mil.
Selling, General & Admin. Expense(SGA) was $3,840 Mil.
Total Current Liabilities was $18,808 Mil.
Long-Term Debt was $6,758 Mil.
Net Income was 492 + 783 + 629 + 592 = $2,496 Mil.
Non Operating Income was 156 + -36 + 0 + 0 = $120 Mil.
Cash Flow from Operations was 698 + 1065 + 1575 + -108 = $3,230 Mil.
|Accounts Receivable was $4,825 Mil.
Revenue was 12266 + 12362 + 12977 + 13858 = $51,463 Mil.
Gross Profit was 2366 + 2326 + 2562 + 2685 = $9,939 Mil.
Total Current Assets was $51,787 Mil.
Total Assets was $106,882 Mil.
Property, Plant and Equipment(Net PPE) was $1,492 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,061 Mil.
Selling, General & Admin. Expense(SGA) was $4,720 Mil.
Total Current Liabilities was $42,191 Mil.
Long-Term Debt was $6,677 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 / 48238)||/||(4825 / 51463)|
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)|
|=||(9939 / 51463)||/||(8998 / 48238)|
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 - (18468 + 1736) / 29010)||/||(1 - (51787 + 1492) / 106882)|
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))|
|=||(4061 / (4061 + 1492))||/||(332 / (332 + 1736))|
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)|
|=||(3840 / 48238)||/||(4720 / 51463)|
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)|
|=||((6758 + 18808) / 29010)||/||((6677 + 42191) / 106882)|
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|
|=||(2496 - 120||-||3230)||/||29010|
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 -2.77 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