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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.
The Hershey Co has a M-score of -2.54 suggests that the company is not a 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 -2.67.
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 * 1.1258||+||0.528 * 0.958||+||0.404 * 0.9059||+||0.892 * 1.0669||+||0.115 * 1.1184|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.038||+||4.679 * -0.0415||-||0.327 * 0.9532|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $620 Mil.|
Revenue was 1871.813 + 1956.253 + 1853.886 + 1508.514 = $7,190 Mil.
Gross Profit was 871.49 + 857.386 + 855.551 + 718.574 = $3,303 Mil.
Total Current Assets was $2,545 Mil.
Total Assets was $5,429 Mil.
Property, Plant and Equipment(Net PPE) was $1,909 Mil.
Depreciation, Depletion and Amortization(DDA) was $202 Mil.
Selling, General & Admin. Expense(SGA) was $1,937 Mil.
Total Current Liabilities was $1,444 Mil.
Long-Term Debt was $1,794 Mil.
Net Income was 252.495 + 186.075 + 232.985 + 159.504 = $831 Mil.
Non Operating Income was -42.57 + 0 + 0 + 0 = $-43 Mil.
Cash Flow from Operations was 203.757 + 564.691 + 274.268 + 56.266 = $1,099 Mil.
|Accounts Receivable was $517 Mil.
Revenue was 1827.426 + 1751.035 + 1746.709 + 1414.444 = $6,740 Mil.
Gross Profit was 849.337 + 755.208 + 742.757 + 618.521 = $2,966 Mil.
Total Current Assets was $2,180 Mil.
Total Assets was $4,846 Mil.
Property, Plant and Equipment(Net PPE) was $1,705 Mil.
Depreciation, Depletion and Amortization(DDA) was $204 Mil.
Selling, General & Admin. Expense(SGA) was $1,749 Mil.
Total Current Liabilities was $1,492 Mil.
Long-Term Debt was $1,540 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)|
|=||(620.493 / 7190.466)||/||(516.593 / 6739.614)|
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)|
|=||(857.386 / 6739.614)||/||(871.49 / 7190.466)|
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 - (2544.974 + 1909.323) / 5428.846)||/||(1 - (2180.021 + 1705.387) / 4845.63)|
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))|
|=||(203.917 / (203.917 + 1705.387))||/||(201.588 / (201.588 + 1909.323))|
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)|
|=||(1936.798 / 7190.466)||/||(1748.903 / 6739.614)|
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)|
|=||((1793.5 + 1444.445) / 5428.846)||/||((1539.8 + 1492.067) / 4845.63)|
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|
|=||(831.059 - -42.57||-||1098.982)||/||5428.846|
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 -2.54 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