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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 9 years, the highest Beneish M-Score of Horizon Pharma PLC was 4.06. The lowest was -2.58. And the median was -0.50.
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 Horizon Pharma PLC 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 * 1.121||+||0.528 * 1.1851||+||0.404 * 1.1846||+||0.892 * 1.296||+||0.115 * 1.0041|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.066||+||4.679 * -0.1263||-||0.327 * 1.1503|
* 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 $305.7 Mil.|
Revenue was 310.35 + 208.702 + 257.378 + 204.69 = $981.1 Mil.
Gross Profit was 160.598 + 123.541 + 176.252 + 127.457 = $587.8 Mil.
Total Current Assets was $1,046.3 Mil.
Total Assets was $4,292.1 Mil.
Property, Plant and Equipment(Net PPE) was $23.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $221.8 Mil.
Selling, General & Admin. Expense(SGA) was $608.3 Mil.
Total Current Liabilities was $605.9 Mil.
Long-Term Debt was $1,799.7 Mil.
Net Income was -130.542 + -5.87 + 14.984 + -45.406 = $-166.8 Mil.
Non Operating Income was -0.881 + 6.771 + -0.011 + -0.187 = $5.7 Mil.
Cash Flow from Operations was 139.185 + 128.787 + 47.303 + 54.181 = $369.5 Mil.
|Accounts Receivable was $210.4 Mil.
Revenue was 244.538 + 226.544 + 172.821 + 113.141 = $757.0 Mil.
Gross Profit was 176.965 + 165.294 + 110.995 + 84.288 = $537.5 Mil.
Total Current Assets was $1,106.1 Mil.
Total Assets was $3,058.6 Mil.
Property, Plant and Equipment(Net PPE) was $14.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $138.3 Mil.
Selling, General & Admin. Expense(SGA) was $440.3 Mil.
Total Current Liabilities was $357.6 Mil.
Long-Term Debt was $1,132.8 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)|
|=||(305.725 / 981.12)||/||(210.437 / 757.044)|
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)|
|=||(537.542 / 757.044)||/||(587.848 / 981.12)|
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 - (1046.282 + 23.484) / 4292.059)||/||(1 - (1106.147 + 14.02) / 3058.588)|
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))|
|=||(138.343 / (138.343 + 14.02))||/||(221.837 / (221.837 + 23.484))|
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)|
|=||(608.308 / 981.12)||/||(440.305 / 757.044)|
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)|
|=||((1799.743 + 605.852) / 4292.059)||/||((1132.756 + 357.552) / 3058.588)|
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|
|=||(-166.834 - 5.692||-||369.456)||/||4292.059|
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.
Horizon Pharma PLC has a M-score of -2.58 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
Horizon Pharma PLC Annual Data
Horizon Pharma PLC Quarterly Data