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Red Hat Inc (NYSE:RHT)
Beneish M-Score
-3.01 (As of Today)

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.

Red Hat Inc has a M-score of -3.01 suggests that the company is not a manipulator.

RHT' s 10-Year Beneish M-Score Range
Min: -4.6   Max: -1.76
Current: -3.01

-4.6
-1.76

During the past 13 years, the highest Beneish M-Score of Red Hat Inc was -1.76. The lowest was -4.60. And the median was -2.82.


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 Red Hat 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 * 0.9838+0.528 * 1.0005+0.404 * 1.1049+0.892 * 1.1645+0.115 * 0.9896
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.018+4.679 * -0.1168-0.327 * 1.476
=-3.01

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

This Year (Nov14) TTM:Last Year (Nov13) TTM:
Accounts Receivable was $355 Mil.
Revenue was 455.895 + 445.899 + 423.754 + 400.397 = $1,726 Mil.
Gross Profit was 384.53 + 378.725 + 359.311 + 339.861 = $1,462 Mil.
Total Current Assets was $1,705 Mil.
Total Assets was $3,548 Mil.
Property, Plant and Equipment(Net PPE) was $174 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $862 Mil.
Total Current Liabilities was $1,173 Mil.
Long-Term Debt was $711 Mil.
Net Income was 47.933 + 46.823 + 37.745 + 45.069 = $178 Mil.
Non Operating Income was 1.559 + -0.289 + 0.357 + 0.283 = $2 Mil.
Cash Flow from Operations was 132.988 + 107.737 + 164.686 + 184.682 = $590 Mil.
Accounts Receivable was $310 Mil.
Revenue was 396.536 + 374.423 + 363.259 + 347.885 = $1,482 Mil.
Gross Profit was 336.109 + 318.843 + 307.202 + 294.28 = $1,256 Mil.
Total Current Assets was $1,469 Mil.
Total Assets was $2,851 Mil.
Property, Plant and Equipment(Net PPE) was $169 Mil.
Depreciation, Depletion and Amortization(DDA) was $73 Mil.
Selling, General & Admin. Expense(SGA) was $727 Mil.
Total Current Liabilities was $1,026 Mil.
Long-Term Debt was $0 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)
=(354.87 / 1725.945) / (309.753 / 1482.103)
=0.2056091 / 0.2089956
=0.9838

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)
=(378.725 / 1482.103) / (384.53 / 1725.945)
=0.8477373 / 0.84731958
=1.0005

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 - (1705.017 + 173.599) / 3547.871) / (1 - (1468.6 + 168.604) / 2851.368)
=0.47049484 / 0.42581806
=1.1049

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
=1725.945 / 1482.103
=1.1645

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))
=(72.894 / (72.894 + 168.604)) / (76.193 / (76.193 + 173.599))
=0.30184101 / 0.30502578
=0.9896

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)
=(862.279 / 1725.945) / (727.345 / 1482.103)
=0.49959819 / 0.49075199
=1.018

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)
=((710.844 + 1172.621) / 3547.871) / ((0 + 1025.546) / 2851.368)
=0.53087189 / 0.35966806
=1.476

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
=(177.57 - 1.91 - 590.093) / 3547.871
=-0.1168

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.

Red Hat Inc has a M-score of -3.01 suggests that the company will not 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.

Red Hat Inc Annual Data

Feb05Feb06Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14
DSRI 0.80140.85011.04851.10580.8120.94511.09031.10841.01231.0307
GMI 0.90530.97380.98490.99131.01010.98761.01570.99090.99221.0007
AQI 1.66270.47861.35910.95871.15110.93871.00361.1070.97980.9461
SGI 1.5751.41671.43941.30551.24771.14661.21521.24621.17271.1549
DEPI 0.66320.87630.9141.14620.87240.95491.00411.08461.17161.0203
SGAI 1.02240.93711.12850.98950.97420.9850.96510.99111.03710.9812
LVGI 1.05490.90.83060.95660.54631.18841.02121.11291.01841.0549
TATA -0.0893-0.1042-0.1036-0.0898-0.0941-0.0956-0.084-0.0983-0.1122-0.1168
M-score -2.41-2.93-2.37-2.52-2.67-2.94-2.59-2.61-2.84-2.89

Red Hat Inc Quarterly Data

Aug12Nov12Feb13May13Aug13Nov13Feb14May14Aug14Nov14
DSRI 1.02791.04381.01230.9990.92611.04831.03071.00721.04560.9838
GMI 0.98080.98470.99220.99881.00361.00311.00070.99780.99851.0005
AQI 1.14420.97270.97980.95470.98370.9120.94611.11351.08371.1049
SGI 1.19281.18231.17271.16421.16731.15981.15491.15811.16611.1645
DEPI 1.18161.21951.17161.16191.09691.02731.02030.96810.97350.9896
SGAI 1.02551.04541.03221.02531.0040.98430.98591.00411.00551.018
LVGI 1.05851.08741.01841.0941.0991.07281.05491.04051.03781.476
TATA -0.1178-0.1178-0.1122-0.1234-0.1237-0.1111-0.1168-0.1268-0.1208-0.1168
M-score -2.79-2.86-2.84-2.95-3.00-2.86-2.89-2.90-2.84-3.01
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