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Beneish M-Score -0.75 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 * 1.0005||+||0.528 * 1.0993||+||0.404 * 1.005||+||0.892 * 2.7615||+||0.115 * 0.8965|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7386||+||4.679 * 0.0122||-||0.327 * 0.9545|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $221.1 Mil.|
Revenue was 226.544 + 172.821 + 113.141 + 103.841 = $616.3 Mil.
Gross Profit was 165.294 + 110.995 + 84.288 + 71.161 = $431.7 Mil.
Total Current Assets was $953.6 Mil.
Total Assets was $2,998.9 Mil.
Property, Plant and Equipment(Net PPE) was $10.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $110.4 Mil.
Selling, General & Admin. Expense(SGA) was $370.4 Mil.
Total Current Liabilities was $321.6 Mil.
Long-Term Debt was $1,137.0 Mil.
Net Income was 3.277 + 31.814 + -19.553 + -31.647 = $-16.1 Mil.
Non Operating Income was -0.176 + -76.245 + -12.372 + -33.229 = $-122.0 Mil.
Cash Flow from Operations was 88.383 + 41.584 + -70.739 + 10.079 = $69.3 Mil.
|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.
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)|
|=||(221.091 / 616.347)||/||(80.022 / 223.194)|
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)|
|=||(110.995 / 223.194)||/||(165.294 / 616.347)|
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 - (953.628 + 10.38) / 2998.918)||/||(1 - (360.767 + 4.656) / 1124.895)|
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))|
|=||(21.134 / (21.134 + 4.656))||/||(110.372 / (110.372 + 10.38))|
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)|
|=||(370.397 / 616.347)||/||(181.602 / 223.194)|
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)|
|=||((1137.011 + 321.589) / 2998.918)||/||((297.022 + 276.154) / 1124.895)|
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|
|=||(-16.109 - -122.022||-||69.307)||/||2998.918|
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 -0.75 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