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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 -2.11. 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 * 1.2027||+||0.528 * 1.0214||+||0.404 * 1.0998||+||0.892 * 1.0386||+||0.115 * 1.1195|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9521||+||4.679 * 0.0091||-||0.327 * 1.0353|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $597 Mil.|
Revenue was 2010.027 + 1961.578 + 1578.35 + 1871.813 = $7,422 Mil.
Gross Profit was 887.065 + 860.137 + 717.474 + 871.49 = $3,336 Mil.
Total Current Assets was $2,247 Mil.
Total Assets was $5,630 Mil.
Property, Plant and Equipment(Net PPE) was $2,152 Mil.
Depreciation, Depletion and Amortization(DDA) was $212 Mil.
Selling, General & Admin. Expense(SGA) was $1,901 Mil.
Total Current Liabilities was $1,936 Mil.
Long-Term Debt was $1,549 Mil.
Net Income was 202.508 + 223.741 + 168.168 + 252.495 = $847 Mil.
Non Operating Income was 0 + 0 + 0 + -42.57 = $-43 Mil.
Cash Flow from Operations was 450.788 + 215.501 + -31.825 + 203.757 = $838 Mil.
|Accounts Receivable was $478 Mil.
Revenue was 1956.253 + 1853.886 + 1508.514 + 1827.426 = $7,146 Mil.
Gross Profit was 857.386 + 855.551 + 718.574 + 849.337 = $3,281 Mil.
Total Current Assets was $2,487 Mil.
Total Assets was $5,357 Mil.
Property, Plant and Equipment(Net PPE) was $1,805 Mil.
Depreciation, Depletion and Amortization(DDA) was $201 Mil.
Selling, General & Admin. Expense(SGA) was $1,923 Mil.
Total Current Liabilities was $1,408 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)|
|=||(596.94 / 7421.768)||/||(477.912 / 7146.079)|
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)|
|=||(860.137 / 7146.079)||/||(887.065 / 7421.768)|
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 - (2247.047 + 2151.901) / 5629.516)||/||(1 - (2487.334 + 1805.345) / 5357.488)|
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))|
|=||(201.033 / (201.033 + 1805.345))||/||(211.532 / (211.532 + 2151.901))|
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)|
|=||(1900.97 / 7421.768)||/||(1922.508 / 7146.079)|
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)|
|=||((1548.963 + 1935.647) / 5629.516)||/||((1795.142 + 1408.022) / 5357.488)|
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|
|=||(846.912 - -42.57||-||838.221)||/||5629.516|
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 -2.15 signals that the company is likely to 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