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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 The Hershey Co was -2.03. The lowest was -3.35. And the median was -2.70.
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 The Hershey Co 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 * 1.113||+||0.528 * 1.0011||+||0.404 * 1.2113||+||0.892 * 0.9797||+||0.115 * 0.8377|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0463||+||4.679 * -0.0514||-||0.327 * 1.1646|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $484 Mil.|
Revenue was 1637.671 + 1828.812 + 1909.222 + 1960.779 = $7,336 Mil.
Gross Profit was 747.398 + 817.376 + 854.36 + 892.064 = $3,311 Mil.
Total Current Assets was $1,808 Mil.
Total Assets was $5,567 Mil.
Property, Plant and Equipment(Net PPE) was $2,199 Mil.
Depreciation, Depletion and Amortization(DDA) was $283 Mil.
Selling, General & Admin. Expense(SGA) was $2,032 Mil.
Total Current Liabilities was $2,671 Mil.
Long-Term Debt was $1,571 Mil.
Net Income was 145.956 + 229.832 + 213.384 + 154.771 = $744 Mil.
Non Operating Income was -8.128 + 21.225 + -54.137 + -9.409 = $-50 Mil.
Cash Flow from Operations was 89.983 + 257.115 + 626.592 + 106.916 = $1,081 Mil.
|Accounts Receivable was $443 Mil.
Revenue was 1578.825 + 1937.8 + 2010.027 + 1961.578 = $7,488 Mil.
Gross Profit was 735.408 + 900.843 + 887.065 + 860.137 = $3,383 Mil.
Total Current Assets was $2,007 Mil.
Total Assets was $5,449 Mil.
Property, Plant and Equipment(Net PPE) was $2,180 Mil.
Depreciation, Depletion and Amortization(DDA) was $230 Mil.
Selling, General & Admin. Expense(SGA) was $1,982 Mil.
Total Current Liabilities was $2,018 Mil.
Long-Term Debt was $1,547 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)|
|=||(483.545 / 7336.484)||/||(443.452 / 7488.23)|
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)|
|=||(3383.453 / 7488.23)||/||(3311.198 / 7336.484)|
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 - (1807.599 + 2198.615) / 5567.384)||/||(1 - (2007.447 + 2180.326) / 5449.33)|
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))|
|=||(230.2 / (230.2 + 2180.326))||/||(282.906 / (282.906 + 2198.615))|
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)|
|=||(2031.843 / 7336.484)||/||(1982.182 / 7488.23)|
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)|
|=||((1571.179 + 2671.446) / 5567.384)||/||((1547.399 + 2018.272) / 5449.33)|
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|
|=||(743.943 - -50.449||-||1080.606)||/||5567.384|
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.
The Hershey Co has a M-score of -2.63 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
The Hershey Co Annual Data
The Hershey Co Quarterly Data