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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 0.83. The lowest was -3.89. And the median was -2.56.
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 * 0.8658||+||0.528 * 1.0394||+||0.404 * 0.8902||+||0.892 * 0.9764||+||0.115 * 4.1128|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8627||+||4.679 * -0.0604||-||0.327 * 0.9758|
|This Year (Jan17) TTM:||Last Year (Jan16) TTM:|
|Accounts Receivable was $3,478 Mil.|
Revenue was 12684 + 12512 + 11892 + 11588 = $48,676 Mil.
Gross Profit was 2248 + 2291 + 2172 + 2250 = $8,961 Mil.
Total Current Assets was $17,775 Mil.
Total Assets was $28,192 Mil.
Property, Plant and Equipment(Net PPE) was $1,730 Mil.
Depreciation, Depletion and Amortization(DDA) was $337 Mil.
Selling, General & Admin. Expense(SGA) was $3,820 Mil.
Total Current Liabilities was $18,587 Mil.
Long-Term Debt was $6,688 Mil.
Net Income was 611 + 492 + 783 + 629 = $2,515 Mil.
Non Operating Income was 0 + 156 + -36 + 0 = $120 Mil.
Cash Flow from Operations was 767 + 698 + 1065 + 1569 = $4,099 Mil.
|Accounts Receivable was $4,114 Mil.
Revenue was 12246 + 12266 + 12362 + 12977 = $49,851 Mil.
Gross Profit was 2285 + 2366 + 2326 + 2562 = $9,539 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 $4,535 Mil.
Total Current Liabilities was $16,761 Mil.
Long-Term Debt was $6,683 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)|
|=||(3478 / 48676)||/||(4114 / 49851)|
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)|
|=||(9539 / 49851)||/||(8961 / 48676)|
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 - (17775 + 1730) / 28192)||/||(1 - (15155 + 1529) / 25517)|
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))|
|=||(3112 / (3112 + 1529))||/||(337 / (337 + 1730))|
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)|
|=||(3820 / 48676)||/||(4535 / 49851)|
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)|
|=||((6688 + 18587) / 28192)||/||((6683 + 16761) / 25517)|
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|
|=||(2515 - 120||-||4099)||/||28192|
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 -2.54 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