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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 641.18. The lowest was -6.48. And the median was -2.36.
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 * 0.7477||+||0.528 * 1.0765||+||0.404 * 1.0952||+||0.892 * 1.0193||+||0.115 * 0.7828|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8657||+||4.679 * -0.027||-||0.327 * 0.967|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $2,342 Mil.|
Revenue was 1269.5 + 1226.2 + 1452.5 + 1553.5 = $5,502 Mil.
Gross Profit was 513.5 + 431 + 592.1 + 739.9 = $2,277 Mil.
Total Current Assets was $3,732 Mil.
Total Assets was $35,455 Mil.
Property, Plant and Equipment(Net PPE) was $665 Mil.
Depreciation, Depletion and Amortization(DDA) was $260 Mil.
Selling, General & Admin. Expense(SGA) was $1,603 Mil.
Total Current Liabilities was $848 Mil.
Long-Term Debt was $6,232 Mil.
Net Income was -34.8 + -33.9 + -143.1 + -75.6 = $-287 Mil.
Non Operating Income was 0.5 + 106.7 + -15.1 + 39.8 = $132 Mil.
Cash Flow from Operations was 72.4 + -88.9 + 448.5 + 105.2 = $537 Mil.
|Accounts Receivable was $3,073 Mil.
Revenue was 1143.8 + 1141.8 + 1512.4 + 1599.4 = $5,397 Mil.
Gross Profit was 413.5 + 409.3 + 714.5 + 866.8 = $2,404 Mil.
Total Current Assets was $5,353 Mil.
Total Assets was $31,455 Mil.
Property, Plant and Equipment(Net PPE) was $944 Mil.
Depreciation, Depletion and Amortization(DDA) was $266 Mil.
Selling, General & Admin. Expense(SGA) was $1,817 Mil.
Total Current Liabilities was $871 Mil.
Long-Term Debt was $5,624 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)|
|=||(2341.7 / 5501.7)||/||(3072.7 / 5397.4)|
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)|
|=||(431 / 5397.4)||/||(513.5 / 5501.7)|
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 - (3731.7 + 664.7) / 35455.1)||/||(1 - (5352.5 + 943.9) / 31455)|
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))|
|=||(266.2 / (266.2 + 943.9))||/||(259.8 / (259.8 + 664.7))|
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)|
|=||(1603 / 5501.7)||/||(1816.6 / 5397.4)|
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)|
|=||((6232 + 847.5) / 35455.1)||/||((5623.7 + 871.3) / 31455)|
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|
|=||(-287.4 - 131.9||-||537.2)||/||35455.1|
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 -2.73 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