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M D C Holdings Inc (NYSE:MDC)
Beneish M-Score
-2.08 (As of Today)

Warning Sign:

Beneish M-Score -1.03 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.

M D C Holdings Inc has a M-score of -2.08 signals that the company is a manipulator.

MDC' s 10-Year Beneish M-Score Range
Min: -4.76   Max: 3.19
Current: -2.08

-4.76
3.19

During the past 13 years, the highest Beneish M-Score of M D C Holdings Inc was 3.19. The lowest was -4.76. And the median was -1.91.


Definition

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 * 0.655+0.528 * 0.9694+0.404 * 1.1628+0.892 * 1.1343+0.115 * 1.0769
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.96+4.679 * 0.1096-0.327 * 0.9447
=-2.08

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $27 Mil.
Revenue was 431.261 + 318.534 + 420.903 + 448 = $1,619 Mil.
Gross Profit was 73.714 + 59.056 + 39.757 + 92.726 = $265 Mil.
Total Current Assets was $2,262 Mil.
Total Assets was $2,597 Mil.
Property, Plant and Equipment(Net PPE) was $31 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $211 Mil.
Total Current Liabilities was $190 Mil.
Long-Term Debt was $1,096 Mil.
Net Income was 21.542 + 11.504 + 30.709 + 36.251 = $100 Mil.
Non Operating Income was 4.796 + -5.727 + 43.356 + -7.409 = $35 Mil.
Cash Flow from Operations was 17.976 + -114.248 + -43.689 + -79.617 = $-220 Mil.
Accounts Receivable was $37 Mil.
Revenue was 402.134 + 331.748 + 358.891 + 334.33 = $1,427 Mil.
Gross Profit was 72.772 + 57.672 + 32.994 + 63.261 = $227 Mil.
Total Current Assets was $2,213 Mil.
Total Assets was $2,497 Mil.
Property, Plant and Equipment(Net PPE) was $32 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $194 Mil.
Total Current Liabilities was $213 Mil.
Long-Term Debt was $1,095 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(27.25 / 1618.698) / (36.676 / 1427.103)
=0.01683452 / 0.02569962
=0.655

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(59.056 / 1427.103) / (73.714 / 1618.698)
=0.15885258 / 0.16386812
=0.9694

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (2261.638 + 31.157) / 2596.561) / (1 - (2213.177 + 32.184) / 2496.542)
=0.11698782 / 0.10061157
=1.1628

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=1618.698 / 1427.103
=1.1343

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))
=(4.182 / (4.182 + 32.184)) / (3.725 / (3.725 + 31.157))
=0.11499753 / 0.1067886
=1.0769

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)
=(211.313 / 1618.698) / (194.057 / 1427.103)
=0.13054504 / 0.13597967
=0.96

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)
=((1096.112 + 189.556) / 2596.561) / ((1095.225 + 213.274) / 2496.542)
=0.49514261 / 0.52412457
=0.9447

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(100.006 - 35.016 - -219.578) / 2596.561
=0.1096

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 -2.08 signals that the company is likely to be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

M D C Holdings Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 2.68894.19930.92351.66432.81211.27790.12041.22420.92170.5898
GMI 0.49670.98061.2431.54871.02650.72511.23891.28380.85180.8626
AQI 0.87911.91251.23821.12280.56890.94111.08331.93281.2251.5172
SGI 1.37421.21920.98140.6010.50530.61611.03180.88151.41511.4091
DEPI 1.31591.12190.92321.10652.66581.57090.99710.82751.18771.143
SGAI 5.93290.99381.10961.23751.1871.19440.92220.92490.66010.9047
LVGI 1.01491.00570.90451.14091.10420.99111.09970.86771.02730.9732
TATA 0.15020.2411-0.0094-0.1703-0.3475-0.07330.0538-0.00960.07510.2153
M-score -1.022.16-2.38-2.76-2.91-3.04-2.87-1.86-1.75-1.31

M D C Holdings Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 1.20032.24931.44320.92790.60750.57330.55040.59550.76930.655
GMI 1.1320.73530.52170.88240.84460.96450.99840.89910.93390.9694
AQI 2.52932.40443.61391.2251.17261.63890.97421.51721.86021.1628
SGI 0.89011.08971.27661.40561.54091.58581.49791.39561.22851.1343
DEPI 0.90480.98271.09281.18771.21671.25431.21511.1431.14391.0769
SGAI 0.86550.72710.6550.66450.71090.78620.89710.91350.95780.96
LVGI 0.8680.86350.89921.02731.09280.98791.01540.97320.89020.9447
TATA -0.0189-0.00570.03630.06870.08790.19630.21880.2060.23320.1096
M-score -1.74-0.76-0.75-1.76-1.92-1.12-1.40-1.34-1.02-2.08
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