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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.
M.D.C. Holdings, Inc. has a M-score of -1.34 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of M.D.C. Holdings, Inc. was 2.44. The lowest was -3.04. And the median was -2.16.
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 M.D.C. Holdings, 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 * 0.5904||+||0.528 * 0.8614||+||0.404 * 1.5172||+||0.892 * 1.4077||+||0.115 * 1.143|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9056||+||4.679 * 0.208||-||0.327 * 0.9732|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $23 Mil.|
Revenue was 420.903 + 448 + 416.018 + 331.748 = $1,617 Mil.
Gross Profit was 39.757 + 92.726 + 86.656 + 57.672 = $277 Mil.
Total Current Assets was $2,225 Mil.
Total Assets was $2,595 Mil.
Property, Plant and Equipment(Net PPE) was $31 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $213 Mil.
Total Current Liabilities was $287 Mil.
Long-Term Debt was $1,096 Mil.
Net Income was 30.709 + 36.251 + 224.909 + 22.516 = $314 Mil.
Non Operating Income was 43.356 + -7.409 + 1.33 + 6.875 = $44 Mil.
Cash Flow from Operations was -43.689 + -79.617 + -90.825 + -55.418 = $-270 Mil.
|Accounts Receivable was $28 Mil.
Revenue was 358.891 + 334.33 + 268.934 + 186.268 = $1,148 Mil.
Gross Profit was 32.994 + 63.261 + 46.996 + 26.124 = $169 Mil.
Total Current Assets was $1,745 Mil.
Total Assets was $1,945 Mil.
Property, Plant and Equipment(Net PPE) was $33 Mil.
Depreciation, Depletion and Amortization(DDA) was $5 Mil.
Selling, General & Admin. Expense(SGA) was $167 Mil.
Total Current Liabilities was $320 Mil.
Long-Term Debt was $745 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)|
|=||(23.407 / 1616.669)||/||(28.163 / 1148.423)|
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)|
|=||(92.726 / 1148.423)||/||(39.757 / 1616.669)|
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 - (2224.668 + 31.248) / 2595.449)||/||(1 - (1744.576 + 33.125) / 1945.441)|
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))|
|=||(4.766 / (4.766 + 33.125))||/||(3.864 / (3.864 + 31.248))|
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)|
|=||(213.283 / 1616.669)||/||(167.295 / 1148.423)|
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)|
|=||((1095.62 + 286.58) / 2595.449)||/||((744.842 + 319.702) / 1945.441)|
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|
|=||(314.385 - 44.152||-||-269.549)||/||2595.449|
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.
M.D.C. Holdings, Inc. has a M-score of -1.34 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
M.D.C. Holdings, Inc. Annual Data
M.D.C. Holdings, Inc. Quarterly Data