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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 Houston American Energy Corp was 669.62. The lowest was -9.14. And the median was -2.34.
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 * 4.4457||+||0.528 * 1.1089||+||0.404 * 0.7205||+||0.892 * 1.0461||+||0.115 * 0.1047|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.6594||+||4.679 * -0.1185||-||0.327 * 29.1785|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $8.93 Mil.|
Revenue was 0.133 + 0.057 + 0.067 + 0.106 = $0.36 Mil.
Gross Profit was 0.094 + 0.032 + 0.045 + 0.079 = $0.25 Mil.
Total Current Assets was $13.11 Mil.
Total Assets was $18.61 Mil.
Property, Plant and Equipment(Net PPE) was $5.50 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.36 Mil.
Selling, General & Admin. Expense(SGA) was $2.36 Mil.
Total Current Liabilities was $9.31 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was -2.623 + -0.512 + -0.684 + -0.535 = $-4.35 Mil.
Non Operating Income was -0.4 + 0 + 0 + 0 = $-0.40 Mil.
Cash Flow from Operations was -0.268 + -0.359 + -0.42 + -0.701 = $-1.75 Mil.
|Accounts Receivable was $1.92 Mil.
Revenue was 0.143 + 0.17 + 0.019 + 0.015 = $0.35 Mil.
Gross Profit was 0.113 + 0.138 + 0.008 + 0.006 = $0.27 Mil.
Total Current Assets was $9.55 Mil.
Total Assets was $13.41 Mil.
Property, Plant and Equipment(Net PPE) was $3.86 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.03 Mil.
Selling, General & Admin. Expense(SGA) was $3.42 Mil.
Total Current Liabilities was $0.23 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)|
|=||(8.934 / 0.363)||/||(1.921 / 0.347)|
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)|
|=||(0.032 / 0.347)||/||(0.094 / 0.363)|
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 - (13.111 + 5.5) / 18.614)||/||(1 - (9.546 + 3.863) / 13.412)|
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))|
|=||(0.025 / (0.025 + 3.863))||/||(0.36 / (0.36 + 5.5))|
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)|
|=||(2.357 / 0.363)||/||(3.417 / 0.347)|
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 + 9.314) / 18.614)||/||((0 + 0.23) / 13.412)|
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|
|=||(-4.354 - -0.4||-||-1.748)||/||18.614|
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 -9.14 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
Houston American Energy Corp Annual Data
Houston American Energy Corp Quarterly Data