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Beneish M-Score 0.77 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 7 years, the highest Beneish M-Score of Horizon Pharma PLC was 8.77. The lowest was -17.05. And the median was 0.63.
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 * 1.0727||+||0.528 * 0.973||+||0.404 * 1.552||+||0.892 * 4.4733||+||0.115 * 0.8381|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.48||+||4.679 * -0.0372||-||0.327 * 1.0726|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $80.0 Mil.|
Revenue was 75.126 + 66.062 + 51.926 + 30.08 = $223.2 Mil.
Gross Profit was 61.482 + 41.252 + 44.307 + 24.825 = $171.9 Mil.
Total Current Assets was $360.8 Mil.
Total Assets was $1,124.9 Mil.
Property, Plant and Equipment(Net PPE) was $4.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $21.1 Mil.
Selling, General & Admin. Expense(SGA) was $181.6 Mil.
Total Current Liabilities was $276.2 Mil.
Long-Term Debt was $297.0 Mil.
Net Income was 2.063 + -27.769 + -206.25 + -102.901 = $-334.9 Mil.
Non Operating Income was 16.176 + -15.582 + -204.735 + -95.165 = $-299.3 Mil.
Cash Flow from Operations was 1.466 + 16.761 + -0.757 + -11.178 = $6.3 Mil.
|Accounts Receivable was $16.7 Mil.
Revenue was 24.112 + 11.131 + 8.693 + 5.959 = $49.9 Mil.
Gross Profit was 20.905 + 8.737 + 4.924 + 2.816 = $37.4 Mil.
Total Current Assets was $85.9 Mil.
Total Assets was $158.2 Mil.
Property, Plant and Equipment(Net PPE) was $3.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.7 Mil.
Selling, General & Admin. Expense(SGA) was $84.6 Mil.
Total Current Liabilities was $45.5 Mil.
Long-Term Debt was $29.7 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)|
|=||(80.022 / 223.194)||/||(16.677 / 49.895)|
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)|
|=||(41.252 / 49.895)||/||(61.482 / 223.194)|
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 - (360.767 + 4.656) / 1124.895)||/||(1 - (85.864 + 3.524) / 158.215)|
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))|
|=||(7.728 / (7.728 + 3.524))||/||(21.134 / (21.134 + 4.656))|
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)|
|=||(181.602 / 223.194)||/||(84.576 / 49.895)|
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)|
|=||((297.022 + 276.154) / 1124.895)||/||((29.672 + 45.485) / 158.215)|
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|
|=||(-334.857 - -299.306||-||6.292)||/||1124.895|
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 0.77 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
Horizon Pharma PLC Annual Data
Horizon Pharma PLC Quarterly Data