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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 -2.68.
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 * 0.952||+||0.528 * 0.9838||+||0.404 * 0.993||+||0.892 * 1.0162||+||0.115 * 0.8973|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0295||+||4.679 * -0.093||-||0.327 * 1.1386|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $761 Mil.|
Revenue was 1960.779 + 1578.825 + 1937.8 + 2010.027 = $7,487 Mil.
Gross Profit was 892.064 + 735.408 + 900.843 + 887.065 = $3,415 Mil.
Total Current Assets was $2,209 Mil.
Total Assets was $5,631 Mil.
Property, Plant and Equipment(Net PPE) was $2,188 Mil.
Depreciation, Depletion and Amortization(DDA) was $241 Mil.
Selling, General & Admin. Expense(SGA) was $2,044 Mil.
Total Current Liabilities was $2,235 Mil.
Long-Term Debt was $1,830 Mil.
Net Income was 154.771 + -99.941 + 244.737 + 202.508 = $502 Mil.
Non Operating Income was -9.409 + -4.759 + 0 + 1.448 = $-13 Mil.
Cash Flow from Operations was 106.916 + 224.546 + 256.402 + 450.788 = $1,039 Mil.
|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 $1,953 Mil.
Total Current Liabilities was $2,192 Mil.
Long-Term Debt was $1,560 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)|
|=||(760.789 / 7487.431)||/||(786.366 / 7367.994)|
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)|
|=||(735.408 / 7367.994)||/||(892.064 / 7487.431)|
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 - (2209.33 + 2187.736) / 5630.62)||/||(1 - (2532.572 + 2078.713) / 5916.553)|
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))|
|=||(203.482 / (203.482 + 2078.713))||/||(241.381 / (241.381 + 2187.736))|
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)|
|=||(2043.576 / 7487.431)||/||(1953.327 / 7367.994)|
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)|
|=||((1830.186 + 2235.241) / 5630.62)||/||((1559.77 + 2192.219) / 5916.553)|
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|
|=||(502.075 - -12.72||-||1038.652)||/||5630.62|
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 -3.02 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