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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 * 1.1231||+||0.528 * 1.0425||+||0.404 * 0.9441||+||0.892 * 0.9844||+||0.115 * 0.9227|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0165||+||4.679 * -0.0311||-||0.327 * 1.2771|
|This Year (Oct16) TTM:||Last Year (Oct15) TTM:|
|Accounts Receivable was $105 Mil.|
Revenue was 131.332 + 125.185 + 2297.477 + 474.543 = $3,029 Mil.
Gross Profit was -94.37 + -85.901 + 1444.347 + 82.03 = $1,346 Mil.
Total Current Assets was $703 Mil.
Total Assets was $2,082 Mil.
Property, Plant and Equipment(Net PPE) was $293 Mil.
Depreciation, Depletion and Amortization(DDA) was $60 Mil.
Selling, General & Admin. Expense(SGA) was $638 Mil.
Total Current Liabilities was $435 Mil.
Long-Term Debt was $1,967 Mil.
Net Income was -146.22 + -123.673 + 700.662 + -81.729 = $349 Mil.
Non Operating Income was 2.121 + 2.61 + 2.847 + -3.121 = $4 Mil.
Cash Flow from Operations was -250.122 + -475.675 + 1959.343 + -824.236 = $409 Mil.
|Accounts Receivable was $95 Mil.
Revenue was 128.415 + 137.718 + 2301.37 + 509.074 = $3,077 Mil.
Gross Profit was -97.986 + -75.79 + 1484.981 + 114.396 = $1,426 Mil.
Total Current Assets was $727 Mil.
Total Assets was $2,290 Mil.
Property, Plant and Equipment(Net PPE) was $299 Mil.
Depreciation, Depletion and Amortization(DDA) was $56 Mil.
Selling, General & Admin. Expense(SGA) was $637 Mil.
Total Current Liabilities was $567 Mil.
Long-Term Debt was $1,502 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)|
|=||(104.764 / 3028.537)||/||(94.76 / 3076.577)|
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)|
|=||(1425.601 / 3076.577)||/||(1346.106 / 3028.537)|
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 - (703.474 + 293.06) / 2082.178)||/||(1 - (726.708 + 298.602) / 2289.897)|
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))|
|=||(55.843 / (55.843 + 298.602))||/||(60.344 / (60.344 + 293.06))|
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)|
|=||(637.501 / 3028.537)||/||(637.119 / 3076.577)|
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)|
|=||((1967.206 + 434.857) / 2082.178)||/||((1501.938 + 566.548) / 2289.897)|
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|
|=||(349.04 - 4.457||-||409.31)||/||2082.178|
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 -2.63 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