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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 13 years, the highest Beneish M-Score of M.D.C. Holdings Inc was 2.41. The lowest was -5.29. And the median was -1.85.
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 * 1.4983||+||0.528 * 0.995||+||0.404 * 1.0427||+||0.892 * 1.2164||+||0.115 * 0.8144|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9101||+||4.679 * -0.021||-||0.327 * 0.9957|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $42 Mil.|
Revenue was 672.338 + 595.42 + 571.511 + 396.744 = $2,236 Mil.
Gross Profit was 92.517 + 98.936 + 93.859 + 65.055 = $350 Mil.
Total Current Assets was $2,148 Mil.
Total Assets was $2,529 Mil.
Property, Plant and Equipment(Net PPE) was $28 Mil.
Depreciation, Depletion and Amortization(DDA) was $5 Mil.
Selling, General & Admin. Expense(SGA) was $251 Mil.
Total Current Liabilities was $252 Mil.
Long-Term Debt was $956 Mil.
Net Income was 40.376 + 26.359 + 26.913 + 9.563 = $103 Mil.
Non Operating Income was 31.689 + -1.884 + 7.714 + 2.804 = $40 Mil.
Cash Flow from Operations was 124.82 + 13.183 + -7.101 + -14.985 = $116 Mil.
|Accounts Receivable was $23 Mil.
Revenue was 530.101 + 468.487 + 461.708 + 377.919 = $1,838 Mil.
Gross Profit was 70.185 + 81.905 + 76.689 + 57.802 = $287 Mil.
Total Current Assets was $2,064 Mil.
Total Assets was $2,416 Mil.
Property, Plant and Equipment(Net PPE) was $28 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $226 Mil.
Total Current Liabilities was $230 Mil.
Long-Term Debt was $929 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)|
|=||(42.492 / 2236.013)||/||(23.314 / 1838.215)|
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)|
|=||(286.581 / 1838.215)||/||(350.367 / 2236.013)|
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 - (2147.763 + 28.041) / 2528.589)||/||(1 - (2064.401 + 28.226) / 2415.899)|
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))|
|=||(4.069 / (4.069 + 28.226))||/||(5.132 / (5.132 + 28.041))|
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)|
|=||(250.54 / 2236.013)||/||(226.317 / 1838.215)|
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)|
|=||((956.131 + 252.388) / 2528.589)||/||((929.135 + 230.472) / 2415.899)|
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|
|=||(103.211 - 40.323||-||115.917)||/||2528.589|
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 -1.92 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