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Beneish M-Score 0.20 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.
Horizon Pharma Inc has a M-score of 0.20 signals that the company is a manipulator.
During the past 6 years, the highest Beneish M-Score of Horizon Pharma Inc was 8.77. The lowest was -17.05. And the median was 0.20.
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 Inc 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 * 1.1229||+||0.528 * 0.5405||+||0.404 * 1.0843||+||0.892 * 4.6682||+||0.115 * 0.8286|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.3202||+||4.679 * -0.0966||-||0.327 * 1.4303|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $40.10 Mil.|
Revenue was 51.926 + 26.373 + 26.218 + 12.254 = $116.77 Mil.
Gross Profit was 44.307 + 24.825 + 20.905 + 8.737 = $98.77 Mil.
Total Current Assets was $162.75 Mil.
Total Assets was $299.13 Mil.
Property, Plant and Equipment(Net PPE) was $3.90 Mil.
Depreciation, Depletion and Amortization(DDA) was $12.79 Mil.
Selling, General & Admin. Expense(SGA) was $110.78 Mil.
Total Current Liabilities was $69.50 Mil.
Long-Term Debt was $112.77 Mil.
Net Income was -206.25 + -102.901 + -5.492 + -18.441 = $-333.08 Mil.
Non Operating Income was -204.735 + -68.761 + 1.118 + 0.454 = $-271.92 Mil.
Cash Flow from Operations was -0.757 + -11.178 + -9.441 + -10.899 = $-32.28 Mil.
|Accounts Receivable was $7.65 Mil.
Revenue was 8.693 + 5.959 + 6.521 + 3.841 = $25.01 Mil.
Gross Profit was 4.924 + 2.816 + 2.711 + 0.986 = $11.44 Mil.
Total Current Assets was $96.81 Mil.
Total Assets was $169.86 Mil.
Property, Plant and Equipment(Net PPE) was $3.67 Mil.
Depreciation, Depletion and Amortization(DDA) was $6.38 Mil.
Selling, General & Admin. Expense(SGA) was $74.10 Mil.
Total Current Liabilities was $37.96 Mil.
Long-Term Debt was $34.40 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)|
|=||(40.1 / 116.771)||/||(7.65 / 25.014)|
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)|
|=||(24.825 / 25.014)||/||(44.307 / 116.771)|
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 - (162.749 + 3.897) / 299.134)||/||(1 - (96.811 + 3.668) / 169.86)|
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))|
|=||(6.384 / (6.384 + 3.668))||/||(12.791 / (12.791 + 3.897))|
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)|
|=||(110.778 / 116.771)||/||(74.1 / 25.014)|
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)|
|=||((112.774 + 69.501) / 299.134)||/||((34.403 + 37.961) / 169.86)|
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|
|=||(-333.084 - -271.924||-||-32.275)||/||299.134|
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 Inc has a M-score of 0.20 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 Inc Annual Data
Horizon Pharma Inc Quarterly Data