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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 -1.94. The lowest was -3.35. And the median was -2.66.
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 * 1.0149||+||0.528 * 1.0065||+||0.404 * 1.2251||+||0.892 * 1.0314||+||0.115 * 0.9872|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9938||+||4.679 * -0.1049||-||0.327 * 1.11|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|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.
Net Income was -99.941 + 244.737 + 202.508 + 223.741 = $571 Mil.
Non Operating Income was -4.759 + 0 + 0 + 0 = $-5 Mil.
Cash Flow from Operations was 224.546 + 256.402 + 450.788 + 215.501 = $1,147 Mil.
|Accounts Receivable was $424 Mil.
Revenue was 1578.35 + 1871.813 + 1956.253 + 1853.886 = $7,260 Mil.
Gross Profit was 717.474 + 871.49 + 857.386 + 855.551 = $3,302 Mil.
Total Current Assets was $2,262 Mil.
Total Assets was $5,185 Mil.
Property, Plant and Equipment(Net PPE) was $1,943 Mil.
Depreciation, Depletion and Amortization(DDA) was $202 Mil.
Selling, General & Admin. Expense(SGA) was $1,934 Mil.
Total Current Liabilities was $1,262 Mil.
Long-Term Debt was $1,795 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)|
|=||(443.452 / 7488.23)||/||(423.648 / 7260.302)|
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)|
|=||(900.843 / 7260.302)||/||(735.408 / 7488.23)|
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 - (2007.447 + 2180.326) / 5449.33)||/||(1 - (2261.809 + 1943.387) / 5184.969)|
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))|
|=||(202.291 / (202.291 + 1943.387))||/||(230.2 / (230.2 + 2180.326))|
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)|
|=||(1982.182 / 7488.23)||/||(1933.844 / 7260.302)|
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)|
|=||((1547.399 + 2018.272) / 5449.33)||/||((1794.83 + 1261.565) / 5184.969)|
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|
|=||(571.045 - -4.759||-||1147.237)||/||5449.33|
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 -2.87 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