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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 0.33. 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 * 1.0073||+||0.528 * 1.0373||+||0.404 * 0.8935||+||0.892 * 0.9881||+||0.115 * 0.7706|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9771||+||4.679 * -0.1027||-||0.327 * 1.0912|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Jan17) TTM:||Last Year (Jan16) TTM:|
|Accounts Receivable was $826 Mil.|
Revenue was 451.882 + 131.332 + 125.185 + 2297.477 = $3,006 Mil.
Gross Profit was 63.105 + -94.37 + -85.901 + 1444.347 = $1,327 Mil.
Total Current Assets was $1,203 Mil.
Total Assets was $2,578 Mil.
Property, Plant and Equipment(Net PPE) was $282 Mil.
Depreciation, Depletion and Amortization(DDA) was $121 Mil.
Selling, General & Admin. Expense(SGA) was $625 Mil.
Total Current Liabilities was $555 Mil.
Long-Term Debt was $2,593 Mil.
Net Income was -104.514 + -146.22 + -123.673 + 700.662 = $326 Mil.
Non Operating Income was 0.083 + 2.121 + 2.61 + 2.847 = $8 Mil.
Cash Flow from Operations was -650.12 + -250.122 + -475.675 + 1959.343 = $583 Mil.
|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 $87 Mil.
Selling, General & Admin. Expense(SGA) was $647 Mil.
Total Current Liabilities was $589 Mil.
Long-Term Debt was $2,627 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)|
|=||(825.897 / 3005.876)||/||(829.774 / 3042.046)|
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)|
|=||(1393.235 / 3042.046)||/||(1327.181 / 3005.876)|
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 - (1202.834 + 282.358) / 2577.631)||/||(1 - (1220.659 + 290.202) / 2874.046)|
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))|
|=||(87.036 / (87.036 + 290.202))||/||(120.666 / (120.666 + 282.358))|
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)|
|=||(624.702 / 3005.876)||/||(647.046 / 3042.046)|
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)|
|=||((2592.622 + 554.637) / 2577.631)||/||((2626.933 + 589.032) / 2874.046)|
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|
|=||(326.255 - 7.661||-||583.426)||/||2577.631|
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 -3.04 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