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Beneish M-Score -0.07 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 0.50.
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 * 1.3076||+||0.528 * 1.0811||+||0.404 * 1.7926||+||0.892 * 2.7002||+||0.115 * 0.9076|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9215||+||4.679 * 0.036||-||0.327 * 0.7774|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $182.9 Mil.|
Revenue was 172.821 + 113.141 + 103.841 + 75.126 = $464.9 Mil.
Gross Profit was 110.995 + 84.288 + 71.161 + 61.482 = $327.9 Mil.
Total Current Assets was $898.2 Mil.
Total Assets was $2,942.7 Mil.
Property, Plant and Equipment(Net PPE) was $9.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $73.9 Mil.
Selling, General & Admin. Expense(SGA) was $333.1 Mil.
Total Current Liabilities was $290.9 Mil.
Long-Term Debt was $1,132.9 Mil.
Net Income was 31.814 + -19.553 + -31.647 + 2.063 = $-17.3 Mil.
Non Operating Income was -76.245 + -12.372 + -33.229 + 16.176 = $-105.7 Mil.
Cash Flow from Operations was 41.584 + -70.739 + 10.079 + 1.466 = $-17.6 Mil.
|Accounts Receivable was $51.8 Mil.
Revenue was 66.062 + 51.926 + 30.08 + 24.112 = $172.2 Mil.
Gross Profit was 41.252 + 44.307 + 24.825 + 20.905 = $131.3 Mil.
Total Current Assets was $197.7 Mil.
Total Assets was $328.4 Mil.
Property, Plant and Equipment(Net PPE) was $4.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $16.3 Mil.
Selling, General & Admin. Expense(SGA) was $133.9 Mil.
Total Current Liabilities was $204.4 Mil.
Long-Term Debt was $0.0 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)|
|=||(182.868 / 464.929)||/||(51.792 / 172.18)|
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)|
|=||(84.288 / 172.18)||/||(110.995 / 464.929)|
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 - (898.211 + 9.773) / 2942.687)||/||(1 - (197.675 + 4.031) / 328.364)|
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))|
|=||(16.291 / (16.291 + 4.031))||/||(73.916 / (73.916 + 9.773))|
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)|
|=||(333.128 / 464.929)||/||(133.877 / 172.18)|
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)|
|=||((1132.898 + 290.899) / 2942.687)||/||((0 + 204.371) / 328.364)|
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|
|=||(-17.323 - -105.67||-||-17.61)||/||2942.687|
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 -0.07 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