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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 H&R Block Inc was 1.53. The lowest was -3.97. And the median was -2.72.
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 H&R Block 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 * 1.1719||+||0.528 * 1.1157||+||0.404 * 1.6078||+||0.892 * 0.9107||+||0.115 * 0.6889|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1607||+||4.679 * -0.0109||-||0.327 * 1.6462|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $830 Mil.|
Revenue was 474.543 + 128.415 + 137.718 + 2301.37 = $3,042 Mil.
Gross Profit was 82.03 + -97.986 + -75.79 + 1484.981 = $1,393 Mil.
Total Current Assets was $1,221 Mil.
Total Assets was $2,874 Mil.
Property, Plant and Equipment(Net PPE) was $290 Mil.
Depreciation, Depletion and Amortization(DDA) was $58 Mil.
Selling, General & Admin. Expense(SGA) was $647 Mil.
Total Current Liabilities was $589 Mil.
Long-Term Debt was $2,627 Mil.
Net Income was -81.729 + -145.007 + -99.659 + 738.841 = $412 Mil.
Non Operating Income was -3.121 + 1.527 + -4.552 + 3.014 = $-3 Mil.
Cash Flow from Operations was -824.236 + -224.467 + -378.246 + 1873.808 = $447 Mil.
|Accounts Receivable was $777 Mil.
Revenue was 509.074 + 134.628 + 133.586 + 2562.99 = $3,340 Mil.
Gross Profit was 114.396 + -87.069 + -64.14 + 1743.591 = $1,707 Mil.
Total Current Assets was $2,778 Mil.
Total Assets was $4,379 Mil.
Property, Plant and Equipment(Net PPE) was $309 Mil.
Depreciation, Depletion and Amortization(DDA) was $40 Mil.
Selling, General & Admin. Expense(SGA) was $612 Mil.
Total Current Liabilities was $2,471 Mil.
Long-Term Debt was $505 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)|
|=||(829.774 / 3042.046)||/||(777.453 / 3340.278)|
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)|
|=||(-97.986 / 3340.278)||/||(82.03 / 3042.046)|
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 - (1220.659 + 290.202) / 2874.046)||/||(1 - (2778.319 + 308.805) / 4378.941)|
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))|
|=||(40.185 / (40.185 + 308.805))||/||(58.241 / (58.241 + 290.202))|
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)|
|=||(647.046 / 3042.046)||/||(612.132 / 3340.278)|
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)|
|=||((2626.933 + 589.032) / 2874.046)||/||((505.46 + 2471.104) / 4378.941)|
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|
|=||(412.446 - -3.132||-||446.859)||/||2874.046|
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.
H&R Block Inc has a M-score of -2.42 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
H&R Block Inc Annual Data
H&R Block Inc Quarterly Data