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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 3.19. The lowest was -5.38. And the median was -1.99.
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 * 1.2738||+||0.528 * 1.0149||+||0.404 * 1.0556||+||0.892 * 1.183||+||0.115 * 0.8942|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9574||+||4.679 * 0.0142||-||0.327 * 1.013|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $43 Mil.|
Revenue was 595.42 + 571.511 + 396.744 + 530.101 = $2,094 Mil.
Gross Profit was 98.936 + 93.859 + 65.055 + 70.185 = $328 Mil.
Total Current Assets was $2,115 Mil.
Total Assets was $2,474 Mil.
Property, Plant and Equipment(Net PPE) was $29 Mil.
Depreciation, Depletion and Amortization(DDA) was $5 Mil.
Selling, General & Admin. Expense(SGA) was $246 Mil.
Total Current Liabilities was $248 Mil.
Long-Term Debt was $933 Mil.
Net Income was 26.359 + 26.913 + 9.563 + 22.595 = $85 Mil.
Non Operating Income was -1.884 + 7.714 + 2.804 + 23.776 = $32 Mil.
Cash Flow from Operations was 13.183 + -7.101 + -14.985 + 26.701 = $18 Mil.
|Accounts Receivable was $29 Mil.
Revenue was 468.487 + 461.708 + 377.919 + 461.719 = $1,770 Mil.
Gross Profit was 81.905 + 76.689 + 57.802 + 65.008 = $281 Mil.
Total Current Assets was $2,025 Mil.
Total Assets was $2,351 Mil.
Property, Plant and Equipment(Net PPE) was $28 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $217 Mil.
Total Current Liabilities was $261 Mil.
Long-Term Debt was $847 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)|
|=||(43.082 / 2093.776)||/||(28.588 / 1769.833)|
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)|
|=||(281.404 / 1769.833)||/||(328.035 / 2093.776)|
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 - (2115.382 + 28.749) / 2474.27)||/||(1 - (2025.224 + 28.499) / 2350.868)|
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))|
|=||(4.084 / (4.084 + 28.499))||/||(4.687 / (4.687 + 28.749))|
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)|
|=||(246.181 / 2093.776)||/||(217.358 / 1769.833)|
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)|
|=||((933.37 + 248.278) / 2474.27)||/||((846.907 + 261.351) / 2350.868)|
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|
|=||(85.43 - 32.41||-||17.798)||/||2474.27|
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 -1.98 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