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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 -2.71.
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 * 0.9226||+||0.528 * 0.9915||+||0.404 * 0.9117||+||0.892 * 0.9719||+||0.115 * 0.9555|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0493||+||4.679 * -0.1258||-||0.327 * 1.1354|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $544 Mil.|
Revenue was 1828.812 + 1909.222 + 1960.779 + 1578.825 = $7,278 Mil.
Gross Profit was 817.376 + 854.36 + 892.064 + 735.408 = $3,299 Mil.
Total Current Assets was $1,773 Mil.
Total Assets was $5,306 Mil.
Property, Plant and Equipment(Net PPE) was $2,230 Mil.
Depreciation, Depletion and Amortization(DDA) was $247 Mil.
Selling, General & Admin. Expense(SGA) was $2,025 Mil.
Total Current Liabilities was $2,337 Mil.
Long-Term Debt was $1,571 Mil.
Net Income was 229.832 + 213.384 + 154.771 + -99.941 = $498 Mil.
Non Operating Income was 21.225 + -54.137 + -9.409 + -4.759 = $-47 Mil.
Cash Flow from Operations was 257.115 + 626.592 + 106.916 + 221.715 = $1,212 Mil.
|Accounts Receivable was $607 Mil.
Revenue was 1937.8 + 2010.027 + 1961.578 + 1578.35 = $7,488 Mil.
Gross Profit was 900.843 + 887.065 + 860.137 + 717.474 = $3,366 Mil.
Total Current Assets was $2,108 Mil.
Total Assets was $5,757 Mil.
Property, Plant and Equipment(Net PPE) was $2,099 Mil.
Depreciation, Depletion and Amortization(DDA) was $221 Mil.
Selling, General & Admin. Expense(SGA) was $1,986 Mil.
Total Current Liabilities was $2,175 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)|
|=||(544.027 / 7277.638)||/||(606.687 / 7487.755)|
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)|
|=||(3365.519 / 7487.755)||/||(3299.208 / 7277.638)|
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 - (1772.918 + 2230.071) / 5305.84)||/||(1 - (2108.099 + 2098.667) / 5757.462)|
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))|
|=||(220.567 / (220.567 + 2098.667))||/||(246.503 / (246.503 + 2230.071))|
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)|
|=||(2025.304 / 7277.638)||/||(1985.955 / 7487.755)|
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)|
|=||((1571.388 + 2336.972) / 5305.84)||/||((1560.265 + 2175.13) / 5757.462)|
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|
|=||(498.046 - -47.08||-||1212.338)||/||5305.84|
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 -3.26 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