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Beneish M-Score 0.68 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 0.77 signals that the company is a manipulator.
During the past 6 years, the highest Beneish M-Score of Horizon Pharma Inc was 8.89. The lowest was -17.06. And the median was 0.37.
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 * 1.3363||+||0.528 * 0.7717||+||0.404 * 0.8941||+||0.892 * 5.2804||+||0.115 * 0.8414|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.3141||+||4.679 * -0.1518||-||0.327 * 1.3069|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $51.79 Mil.|
Revenue was 66.062 + 51.926 + 26.373 + 26.218 = $170.58 Mil.
Gross Profit was 41.252 + 44.307 + 24.825 + 20.905 = $131.29 Mil.
Total Current Assets was $197.68 Mil.
Total Assets was $328.36 Mil.
Property, Plant and Equipment(Net PPE) was $4.03 Mil.
Depreciation, Depletion and Amortization(DDA) was $16.29 Mil.
Selling, General & Admin. Expense(SGA) was $133.88 Mil.
Total Current Liabilities was $204.37 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was -27.769 + -206.25 + -102.901 + -5.492 = $-342.41 Mil.
Non Operating Income was -15.582 + -204.735 + -68.761 + 1.118 = $-287.96 Mil.
Cash Flow from Operations was 16.761 + -0.757 + -11.178 + -9.441 = $-4.62 Mil.
|Accounts Receivable was $7.34 Mil.
Revenue was 11.131 + 8.693 + 5.959 + 6.521 = $32.30 Mil.
Gross Profit was 8.737 + 4.924 + 2.816 + 2.711 = $19.19 Mil.
Total Current Assets was $86.63 Mil.
Total Assets was $158.52 Mil.
Property, Plant and Equipment(Net PPE) was $3.50 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.25 Mil.
Selling, General & Admin. Expense(SGA) was $80.71 Mil.
Total Current Liabilities was $43.55 Mil.
Long-Term Debt was $31.94 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)|
|=||(51.792 / 170.579)||/||(7.34 / 32.304)|
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)|
|=||(44.307 / 32.304)||/||(41.252 / 170.579)|
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 - (197.675 + 4.031) / 328.364)||/||(1 - (86.634 + 3.5) / 158.517)|
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))|
|=||(7.253 / (7.253 + 3.5))||/||(16.291 / (16.291 + 4.031))|
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)|
|=||(133.877 / 170.579)||/||(80.71 / 32.304)|
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 + 204.371) / 328.364)||/||((31.938 + 43.551) / 158.517)|
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|
|=||(-342.412 - -287.96||-||-4.615)||/||328.364|
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 0.77 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 Inc Annual Data
Horizon Pharma Inc Quarterly Data