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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 -2.20. The lowest was -3.35. And the median was -2.70.
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 * 0.9635||+||0.528 * 1.0789||+||0.404 * 1.1794||+||0.892 * 1.0073||+||0.115 * 0.8094|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9369||+||4.679 * -0.0448||-||0.327 * 1.0909|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $581 Mil.|
Revenue was 1970.244 + 2003.454 + 1637.671 + 1828.812 = $7,440 Mil.
Gross Profit was 742.269 + 850.848 + 747.398 + 817.376 = $3,158 Mil.
Total Current Assets was $1,817 Mil.
Total Assets was $5,524 Mil.
Property, Plant and Equipment(Net PPE) was $2,177 Mil.
Depreciation, Depletion and Amortization(DDA) was $302 Mil.
Selling, General & Admin. Expense(SGA) was $1,948 Mil.
Total Current Liabilities was $1,909 Mil.
Long-Term Debt was $2,347 Mil.
Net Income was 116.853 + 227.403 + 145.956 + 229.832 = $720 Mil.
Non Operating Income was -7.456 + -21.8 + -8.128 + 21.225 = $-16 Mil.
Cash Flow from Operations was 560.936 + 75.441 + 89.983 + 257.115 = $983 Mil.
|Accounts Receivable was $599 Mil.
Revenue was 1909.222 + 1960.779 + 1578.825 + 1937.8 = $7,387 Mil.
Gross Profit was 854.36 + 892.064 + 735.408 + 900.843 = $3,383 Mil.
Total Current Assets was $1,849 Mil.
Total Assets was $5,344 Mil.
Property, Plant and Equipment(Net PPE) was $2,240 Mil.
Depreciation, Depletion and Amortization(DDA) was $245 Mil.
Selling, General & Admin. Expense(SGA) was $2,064 Mil.
Total Current Liabilities was $2,218 Mil.
Long-Term Debt was $1,557 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)|
|=||(581.381 / 7440.181)||/||(599.073 / 7386.626)|
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)|
|=||(3382.675 / 7386.626)||/||(3157.891 / 7440.181)|
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 - (1816.778 + 2177.248) / 5524.333)||/||(1 - (1848.598 + 2240.46) / 5344.371)|
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))|
|=||(244.928 / (244.928 + 2240.46))||/||(301.837 / (301.837 + 2177.248))|
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)|
|=||(1947.904 / 7440.181)||/||(2064.114 / 7386.626)|
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)|
|=||((2347.455 + 1909.443) / 5524.333)||/||((1557.091 + 2217.912) / 5344.371)|
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|
|=||(720.044 - -16.159||-||983.475)||/||5524.333|
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 -2.64 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