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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 -2.68.
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 * 1.0212||+||0.528 * 1.0502||+||0.404 * 1.746||+||0.892 * 0.9815||+||0.115 * 0.8769|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1194||+||4.679 * -0.0409||-||0.327 * 2.0827|
|This Year (Jul16) TTM:||Last Year (Jul15) TTM:|
|Accounts Receivable was $103 Mil.|
Revenue was 125.185 + 2297.477 + 474.543 + 128.415 = $3,026 Mil.
Gross Profit was -85.901 + 1444.347 + 82.03 + -97.986 = $1,342 Mil.
Total Current Assets was $608 Mil.
Total Assets was $2,164 Mil.
Property, Plant and Equipment(Net PPE) was $284 Mil.
Depreciation, Depletion and Amortization(DDA) was $58 Mil.
Selling, General & Admin. Expense(SGA) was $662 Mil.
Total Current Liabilities was $609 Mil.
Long-Term Debt was $1,492 Mil.
Net Income was -123.673 + 700.662 + -81.729 + -145.007 = $350 Mil.
Non Operating Income was 2.61 + 2.847 + -3.121 + 1.527 = $4 Mil.
Cash Flow from Operations was -475.675 + 1959.343 + -824.236 + -224.467 = $435 Mil.
|Accounts Receivable was $103 Mil.
Revenue was 137.718 + 2301.37 + 509.074 + 134.628 = $3,083 Mil.
Gross Profit was -75.79 + 1484.981 + 114.396 + -87.069 = $1,437 Mil.
Total Current Assets was $2,111 Mil.
Total Assets was $3,629 Mil.
Property, Plant and Equipment(Net PPE) was $297 Mil.
Depreciation, Depletion and Amortization(DDA) was $52 Mil.
Selling, General & Admin. Expense(SGA) was $602 Mil.
Total Current Liabilities was $1,190 Mil.
Long-Term Debt was $502 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)|
|=||(103.425 / 3025.62)||/||(103.194 / 3082.79)|
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)|
|=||(1436.518 / 3082.79)||/||(1342.49 / 3025.62)|
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 - (608.373 + 284.114) / 2163.542)||/||(1 - (2110.916 + 297.321) / 3629.454)|
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))|
|=||(52.352 / (52.352 + 297.321))||/||(58.496 / (58.496 + 284.114))|
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)|
|=||(661.544 / 3025.62)||/||(602.142 / 3082.79)|
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)|
|=||((1491.79 + 609.159) / 2163.542)||/||((501.96 + 1190.254) / 3629.454)|
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|
|=||(350.253 - 3.863||-||434.965)||/||2163.542|
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 -2.73 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
H&R Block Inc Annual Data
H&R Block Inc Quarterly Data