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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 HRG Group Inc was 537.50. The lowest was -6.49. And the median was -2.43.
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 HRG Group 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 * 1.0122||+||0.528 * 1.0066||+||0.404 * 1.0078||+||0.892 * 1.0103||+||0.115 * 1.1385|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1294||+||4.679 * -0.0262||-||0.327 * 0.999|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $660 Mil.|
Revenue was 1438.4 + 1512.4 + 1599.4 + 1341.2 = $5,891 Mil.
Gross Profit was 705.9 + 714.5 + 866.8 + 662 = $2,949 Mil.
Total Current Assets was $2,850 Mil.
Total Assets was $31,207 Mil.
Property, Plant and Equipment(Net PPE) was $1,055 Mil.
Depreciation, Depletion and Amortization(DDA) was $295 Mil.
Selling, General & Admin. Expense(SGA) was $2,243 Mil.
Total Current Liabilities was $900 Mil.
Long-Term Debt was $5,666 Mil.
Net Income was -109.8 + -6.3 + 98.3 + -75.5 = $-93 Mil.
Non Operating Income was 174 + -11.7 + 44 + -8.1 = $198 Mil.
Cash Flow from Operations was -171.7 + 443.5 + 246.3 + 7.5 = $526 Mil.
|Accounts Receivable was $646 Mil.
Revenue was 1510 + 1500.8 + 1409.2 + 1411.1 = $5,831 Mil.
Gross Profit was 774.5 + 742.4 + 684.1 + 737.4 = $2,938 Mil.
Total Current Assets was $2,783 Mil.
Total Assets was $28,764 Mil.
Property, Plant and Equipment(Net PPE) was $1,010 Mil.
Depreciation, Depletion and Amortization(DDA) was $334 Mil.
Selling, General & Admin. Expense(SGA) was $1,966 Mil.
Total Current Liabilities was $892 Mil.
Long-Term Debt was $5,166 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)|
|=||(660.1 / 5891.4)||/||(645.5 / 5831.1)|
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)|
|=||(714.5 / 5831.1)||/||(705.9 / 5891.4)|
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 - (2849.6 + 1054.8) / 31206.7)||/||(1 - (2783.1 + 1009.7) / 28764)|
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))|
|=||(334.2 / (334.2 + 1009.7))||/||(294.8 / (294.8 + 1054.8))|
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)|
|=||(2243.2 / 5891.4)||/||(1965.9 / 5831.1)|
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)|
|=||((5666 + 899.6) / 31206.7)||/||((5165.9 + 891.8) / 28764)|
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|
|=||(-93.3 - 198.2||-||525.6)||/||31206.7|
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.
HRG Group Inc has a M-score of -2.58 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
HRG Group Inc Annual Data
HRG Group Inc Quarterly Data