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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 Hormel Foods Corp was -1.99. The lowest was -3.20. And the median was -2.50.
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 * 1.0736||+||0.528 * 0.9714||+||0.404 * 1.0921||+||0.892 * 1.0665||+||0.115 * 0.9974|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9779||+||4.679 * -0.0104||-||0.327 * 1.0071|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $578 Mil.|
Revenue was 2395.073 + 2543.771 + 2284.947 + 2244.866 = $9,469 Mil.
Gross Profit was 444.605 + 423.584 + 363.999 + 378.758 = $1,611 Mil.
Total Current Assets was $2,246 Mil.
Total Assets was $5,560 Mil.
Property, Plant and Equipment(Net PPE) was $997 Mil.
Depreciation, Depletion and Amortization(DDA) was $131 Mil.
Selling, General & Admin. Expense(SGA) was $665 Mil.
Total Current Liabilities was $937 Mil.
Long-Term Debt was $250 Mil.
Net Income was 171.718 + 171.264 + 137.975 + 140.09 = $621 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 246.502 + 352.513 + 119.331 + -39.257 = $679 Mil.
|Accounts Receivable was $505 Mil.
Revenue was 2242.672 + 2323.202 + 2159.525 + 2152.686 = $8,878 Mil.
Gross Profit was 398.642 + 385.516 + 330.306 + 352.801 = $1,467 Mil.
Total Current Assets was $2,167 Mil.
Total Assets was $5,067 Mil.
Property, Plant and Equipment(Net PPE) was $968 Mil.
Depreciation, Depletion and Amortization(DDA) was $127 Mil.
Selling, General & Admin. Expense(SGA) was $638 Mil.
Total Current Liabilities was $825 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)|
|=||(578.238 / 9468.657)||/||(505.024 / 8878.085)|
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)|
|=||(423.584 / 8878.085)||/||(444.605 / 9468.657)|
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 - (2246.331 + 997.237) / 5559.623)||/||(1 - (2166.833 + 967.521) / 5067.17)|
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))|
|=||(126.766 / (126.766 + 967.521))||/||(131.043 / (131.043 + 997.237))|
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)|
|=||(665.058 / 9468.657)||/||(637.698 / 8878.085)|
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 + 937.304) / 5559.623)||/||((250 + 824.525) / 5067.17)|
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|
|=||(621.047 - 0||-||679.089)||/||5559.623|
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 -2.38 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