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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 * 0.8668||+||0.528 * 1.0271||+||0.404 * 1.2975||+||0.892 * 1.015||+||0.115 * 0.5901|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0382||+||4.679 * -0.0819||-||0.327 * 1.7659|
|This Year (Oct15) TTM:||Last Year (Oct14) TTM:|
|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.
Net Income was -145.007 + -99.659 + 738.841 + -36.948 = $457 Mil.
Non Operating Income was 1.527 + -4.552 + 3.014 + -6.666 = $-7 Mil.
Cash Flow from Operations was -224.467 + -378.246 + 1873.808 + -619.623 = $651 Mil.
|Accounts Receivable was $108 Mil.
Revenue was 134.628 + 133.586 + 2562.99 + 199.77 = $3,031 Mil.
Gross Profit was -87.069 + -64.14 + 1743.591 + -149.895 = $1,442 Mil.
Total Current Assets was $1,457 Mil.
Total Assets was $3,091 Mil.
Property, Plant and Equipment(Net PPE) was $318 Mil.
Depreciation, Depletion and Amortization(DDA) was $33 Mil.
Selling, General & Admin. Expense(SGA) was $605 Mil.
Total Current Liabilities was $1,076 Mil.
Long-Term Debt was $506 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)|
|=||(94.76 / 3076.577)||/||(107.705 / 3030.974)|
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)|
|=||(-75.79 / 3030.974)||/||(-97.986 / 3076.577)|
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 - (726.708 + 298.602) / 2289.897)||/||(1 - (1457.381 + 318.225) / 3091.29)|
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))|
|=||(32.619 / (32.619 + 318.225))||/||(55.843 / (55.843 + 298.602))|
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)|
|=||(637.119 / 3076.577)||/||(604.599 / 3030.974)|
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)|
|=||((1501.938 + 566.548) / 2289.897)||/||((505.588 + 1075.677) / 3091.29)|
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|
|=||(457.227 - -6.677||-||651.472)||/||2289.897|
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 -3.14 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