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Beneish M-Score 11.89 higher than -2.22, which implies that it might have manipulated its financial results.
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 Houston American Energy Corp was 669.62. The lowest was -36.47. And the median was -1.98.
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 Houston American Energy Corp 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 * 27.8104||+||0.528 * 1.1354||+||0.404 * 0.7962||+||0.892 * 0.8196||+||0.115 * 0.0371|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8528||+||4.679 * -0.1111||-||0.327 * 30.0971|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $8.09 Mil.|
Revenue was 0.102 + 0.133 + 0.057 + 0.067 = $0.36 Mil.
Gross Profit was 0.073 + 0.094 + 0.032 + 0.045 = $0.24 Mil.
Total Current Assets was $11.73 Mil.
Total Assets was $16.45 Mil.
Property, Plant and Equipment(Net PPE) was $4.72 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.84 Mil.
Selling, General & Admin. Expense(SGA) was $2.20 Mil.
Total Current Liabilities was $8.32 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was -1.187 + -2.623 + -0.512 + -0.684 = $-5.01 Mil.
Non Operating Income was 0 + -0.4 + 0 + 0 = $-0.40 Mil.
Cash Flow from Operations was -1.731 + -0.268 + -0.359 + -0.42 = $-2.78 Mil.
|Accounts Receivable was $0.36 Mil.
Revenue was 0.106 + 0.143 + 0.17 + 0.019 = $0.44 Mil.
Gross Profit was 0.079 + 0.113 + 0.138 + 0.008 = $0.34 Mil.
Total Current Assets was $8.29 Mil.
Total Assets was $13.10 Mil.
Property, Plant and Equipment(Net PPE) was $4.80 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.03 Mil.
Selling, General & Admin. Expense(SGA) was $3.15 Mil.
Total Current Liabilities was $0.22 Mil.
Long-Term Debt was $0.00 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)|
|=||(8.092 / 0.359)||/||(0.355 / 0.438)|
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)|
|=||(0.094 / 0.438)||/||(0.073 / 0.359)|
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 - (11.73 + 4.716) / 16.449)||/||(1 - (8.293 + 4.801) / 13.097)|
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))|
|=||(0.027 / (0.027 + 4.801))||/||(0.838 / (0.838 + 4.716))|
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)|
|=||(2.204 / 0.359)||/||(3.153 / 0.438)|
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)|
|=||((0 + 8.316) / 16.449)||/||((0 + 0.22) / 13.097)|
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|
|=||(-5.006 - -0.4||-||-2.778)||/||16.449|
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.
Houston American Energy Corp has a M-score of 11.89 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
Houston American Energy Corp Annual Data
Houston American Energy Corp Quarterly Data