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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 -2.69.
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 * 0.8294||+||0.528 * 1.0316||+||0.404 * 1.0209||+||0.892 * 1.0172||+||0.115 * 0.5225|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9748||+||4.679 * -0.0356||-||0.327 * 0.8293|
|This Year (Jul15) TTM:||Last Year (Jul14) TTM:|
|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 $3,633 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 $505 Mil.
Net Income was -99.659 + 738.841 + -36.948 + -111.998 = $490 Mil.
Non Operating Income was -4.552 + 3.014 + -6.666 + -2.282 = $-10 Mil.
Cash Flow from Operations was -378.246 + 1873.808 + -619.623 + -245.992 = $630 Mil.
|Accounts Receivable was $122 Mil.
Revenue was 133.586 + 2562.99 + 199.77 + 134.34 = $3,031 Mil.
Gross Profit was -64.14 + 1743.591 + -149.895 + -72.723 = $1,457 Mil.
Total Current Assets was $2,292 Mil.
Total Assets was $3,891 Mil.
Property, Plant and Equipment(Net PPE) was $315 Mil.
Depreciation, Depletion and Amortization(DDA) was $27 Mil.
Selling, General & Admin. Expense(SGA) was $607 Mil.
Total Current Liabilities was $1,684 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)|
|=||(103.194 / 3082.79)||/||(122.315 / 3030.686)|
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)|
|=||(1484.981 / 3030.686)||/||(-75.79 / 3082.79)|
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 - (2111.359 + 297.321) / 3632.691)||/||(1 - (2292.161 + 314.531) / 3890.819)|
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))|
|=||(26.692 / (26.692 + 314.531))||/||(52.352 / (52.352 + 297.321))|
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)|
|=||(602.142 / 3082.79)||/||(607.239 / 3030.686)|
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)|
|=||((505.197 + 1190.254) / 3632.691)||/||((505.714 + 1683.919) / 3890.819)|
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|
|=||(490.236 - -10.486||-||629.947)||/||3632.691|
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 -2.76 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