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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.
Hormel Foods Corp has a M-score of -2.51 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Hormel Foods Corp was 1.69. The lowest was -3.24. And the median was -2.51.
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 Hormel Foods Corp 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 * 1.0406||+||0.528 * 0.9642||+||0.404 * 0.9468||+||0.892 * 1.0619||+||0.115 * 0.9715|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.937||+||4.679 * -0.0228||-||0.327 * 0.96|
|This Year (Apr14) TTM:||Last Year (Apr13) TTM:|
|Accounts Receivable was $530 Mil.|
Revenue was 2244.866 + 2242.672 + 2323.202 + 2159.525 = $8,970 Mil.
Gross Profit was 378.758 + 398.642 + 385.516 + 330.306 = $1,493 Mil.
Total Current Assets was $2,173 Mil.
Total Assets was $5,086 Mil.
Property, Plant and Equipment(Net PPE) was $976 Mil.
Depreciation, Depletion and Amortization(DDA) was $127 Mil.
Selling, General & Admin. Expense(SGA) was $630 Mil.
Total Current Liabilities was $752 Mil.
Long-Term Debt was $250 Mil.
Net Income was 140.09 + 153.348 + 157.34 + 113.635 = $564 Mil.
Non Operating Income was 0 + 4.739 + 20.513 + 0 = $25 Mil.
Cash Flow from Operations was -39.257 + 314.292 + 208.956 + 171.291 = $655 Mil.
|Accounts Receivable was $479 Mil.
Revenue was 2152.686 + 2116.241 + 2170.184 + 2008.188 = $8,447 Mil.
Gross Profit was 352.801 + 344.193 + 351.779 + 307.056 = $1,356 Mil.
Total Current Assets was $1,832 Mil.
Total Assets was $4,668 Mil.
Property, Plant and Equipment(Net PPE) was $958 Mil.
Depreciation, Depletion and Amortization(DDA) was $121 Mil.
Selling, General & Admin. Expense(SGA) was $634 Mil.
Total Current Liabilities was $708 Mil.
Long-Term Debt was $250 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)|
|=||(529.764 / 8970.265)||/||(479.42 / 8447.299)|
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)|
|=||(398.642 / 8447.299)||/||(378.758 / 8970.265)|
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 - (2172.612 + 976.247) / 5085.824)||/||(1 - (1832.34 + 957.759) / 4667.641)|
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))|
|=||(120.948 / (120.948 + 957.759))||/||(127.373 / (127.373 + 976.247))|
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)|
|=||(630.417 / 8970.265)||/||(633.604 / 8447.299)|
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)|
|=||((250 + 751.994) / 5085.824)||/||((250 + 707.894) / 4667.641)|
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|
|=||(564.413 - 25.252||-||655.282)||/||5085.824|
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.
Hormel Foods Corp has a M-score of -2.51 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
Hormel Foods Corp Annual Data
Hormel Foods Corp Quarterly Data