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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 8 years, the highest Beneish M-Score of Horizon Pharma PLC was 8.77. The lowest was -17.05. And the median was 0.08.
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 * 0.8293||+||0.528 * 1.0189||+||0.404 * 1.0161||+||0.892 * 2.0071||+||0.115 * 0.9853|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7586||+||4.679 * -0.0924||-||0.327 * 0.998|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $304.4 Mil.|
Revenue was 257.378 + 204.69 + 244.538 + 226.544 = $933.2 Mil.
Gross Profit was 176.252 + 127.457 + 176.965 + 165.294 = $646.0 Mil.
Total Current Assets was $938.0 Mil.
Total Assets was $3,227.5 Mil.
Property, Plant and Equipment(Net PPE) was $22.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $190.1 Mil.
Selling, General & Admin. Expense(SGA) was $507.2 Mil.
Total Current Liabilities was $418.8 Mil.
Long-Term Debt was $1,139.7 Mil.
Net Income was 14.984 + -45.406 + 23.994 + 3.277 = $-3.2 Mil.
Non Operating Income was -0.011 + -0.187 + -29.391 + -0.176 = $-29.8 Mil.
Cash Flow from Operations was 47.303 + 54.181 + 134.938 + 88.383 = $324.8 Mil.
|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.
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)|
|=||(304.382 / 933.15)||/||(182.868 / 464.929)|
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)|
|=||(327.926 / 464.929)||/||(645.968 / 933.15)|
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 - (938.044 + 21.971) / 3227.458)||/||(1 - (898.211 + 9.773) / 2942.687)|
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))|
|=||(73.916 / (73.916 + 9.773))||/||(190.125 / (190.125 + 21.971))|
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)|
|=||(507.23 / 933.15)||/||(333.128 / 464.929)|
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)|
|=||((1139.687 + 418.809) / 3227.458)||/||((1132.898 + 290.899) / 2942.687)|
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|
|=||(-3.151 - -29.765||-||324.805)||/||3227.458|
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 -2.11 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