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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 * 1.1228||+||0.528 * 1.0205||+||0.404 * 1.1403||+||0.892 * 1.0615||+||0.115 * 1.1566|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9726||+||4.679 * -0.0134||-||0.327 * 1.0534|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $786 Mil.|
Revenue was 1961.578 + 1578.35 + 1871.813 + 1956.253 = $7,368 Mil.
Gross Profit was 860.137 + 717.474 + 871.49 + 857.386 = $3,306 Mil.
Total Current Assets was $2,533 Mil.
Total Assets was $5,917 Mil.
Property, Plant and Equipment(Net PPE) was $2,079 Mil.
Depreciation, Depletion and Amortization(DDA) was $203 Mil.
Selling, General & Admin. Expense(SGA) was $1,925 Mil.
Total Current Liabilities was $2,192 Mil.
Long-Term Debt was $1,560 Mil.
Net Income was 223.741 + 168.168 + 252.495 + 186.075 = $830 Mil.
Non Operating Income was 0 + 0 + -42.57 + 0 = $-43 Mil.
Cash Flow from Operations was 215.501 + -31.825 + 203.757 + 564.691 = $952 Mil.
|Accounts Receivable was $660 Mil.
Revenue was 1853.886 + 1508.514 + 1827.426 + 1751.035 = $6,941 Mil.
Gross Profit was 855.551 + 718.574 + 849.337 + 755.208 = $3,179 Mil.
Total Current Assets was $2,376 Mil.
Total Assets was $5,078 Mil.
Property, Plant and Equipment(Net PPE) was $1,720 Mil.
Depreciation, Depletion and Amortization(DDA) was $198 Mil.
Selling, General & Admin. Expense(SGA) was $1,865 Mil.
Total Current Liabilities was $1,261 Mil.
Long-Term Debt was $1,796 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)|
|=||(786.366 / 7367.994)||/||(659.74 / 6940.861)|
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)|
|=||(717.474 / 6940.861)||/||(860.137 / 7367.994)|
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 - (2532.572 + 2078.713) / 5916.553)||/||(1 - (2375.694 + 1719.82) / 5077.919)|
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))|
|=||(197.746 / (197.746 + 1719.82))||/||(203.482 / (203.482 + 2078.713))|
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)|
|=||(1925.074 / 7367.994)||/||(1864.582 / 6940.861)|
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)|
|=||((1559.77 + 2192.219) / 5916.553)||/||((1796.263 + 1260.768) / 5077.919)|
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|
|=||(830.479 - -42.57||-||952.124)||/||5916.553|
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 -2.30 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