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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 -3.02. And the median was -2.48.
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 * 1.0382||+||0.528 * 0.961||+||0.404 * 1.0932||+||0.892 * 1.0645||+||0.115 * 1.0059|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9747||+||4.679 * -0.0264||-||0.327 * 1.0498|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $610 Mil.|
Revenue was 2543.771 + 2284.947 + 2244.866 + 2242.672 = $9,316 Mil.
Gross Profit was 423.584 + 363.999 + 378.758 + 398.642 = $1,565 Mil.
Total Current Assets was $2,133 Mil.
Total Assets was $5,456 Mil.
Property, Plant and Equipment(Net PPE) was $1,002 Mil.
Depreciation, Depletion and Amortization(DDA) was $130 Mil.
Selling, General & Admin. Expense(SGA) was $651 Mil.
Total Current Liabilities was $955 Mil.
Long-Term Debt was $250 Mil.
Net Income was 171.264 + 137.975 + 140.09 + 153.348 = $603 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 352.513 + 119.331 + -39.257 + 314.292 = $747 Mil.
|Accounts Receivable was $552 Mil.
Revenue was 2323.202 + 2159.525 + 2152.686 + 2116.241 = $8,752 Mil.
Gross Profit was 385.516 + 330.306 + 352.801 + 344.193 = $1,413 Mil.
Total Current Assets was $2,047 Mil.
Total Assets was $4,916 Mil.
Property, Plant and Equipment(Net PPE) was $955 Mil.
Depreciation, Depletion and Amortization(DDA) was $125 Mil.
Selling, General & Admin. Expense(SGA) was $627 Mil.
Total Current Liabilities was $784 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)|
|=||(609.526 / 9316.256)||/||(551.5 / 8751.654)|
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)|
|=||(363.999 / 8751.654)||/||(423.584 / 9316.256)|
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 - (2132.771 + 1001.767) / 5455.619)||/||(1 - (2047.413 + 955.333) / 4915.88)|
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))|
|=||(124.85 / (124.85 + 955.333))||/||(130.044 / (130.044 + 1001.767))|
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)|
|=||(650.948 / 9316.256)||/||(627.34 / 8751.654)|
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 + 954.692) / 5455.619)||/||((250 + 784.009) / 4915.88)|
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|
|=||(602.677 - 0||-||746.879)||/||5455.619|
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