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Red Hat Inc (NYSE:RHT)
Beneish M-Score
-3.16 (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 -3.16 suggests that the company is not a manipulator.

RHT' s 10-Year Beneish M-Score Range
Min: -4.6   Max: -1.76
Current: -3.16

-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 -2.84.


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 * 0.9253+0.528 * 1.0007+0.404 * 0.972+0.892 * 1.1577+0.115 * 0.9779
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0021+4.679 * -0.1282-0.327 * 1.4133
=-3.16

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

This Year (May15) TTM:Last Year (May14) TTM:
Accounts Receivable was $285 Mil.
Revenue was 481.001 + 463.941 + 455.895 + 445.899 = $1,847 Mil.
Gross Profit was 409.604 + 393.724 + 384.53 + 378.725 = $1,567 Mil.
Total Current Assets was $1,701 Mil.
Total Assets was $3,760 Mil.
Property, Plant and Equipment(Net PPE) was $168 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $921 Mil.
Total Current Liabilities was $1,245 Mil.
Long-Term Debt was $720 Mil.
Net Income was 48.086 + 47.7 + 47.933 + 46.823 = $191 Mil.
Non Operating Income was -0.203 + 4.785 + 1.559 + -0.289 = $6 Mil.
Cash Flow from Operations was 208.758 + 217.384 + 132.988 + 107.737 = $667 Mil.
Accounts Receivable was $266 Mil.
Revenue was 423.754 + 400.397 + 396.536 + 374.423 = $1,595 Mil.
Gross Profit was 359.311 + 339.861 + 336.109 + 318.843 = $1,354 Mil.
Total Current Assets was $1,309 Mil.
Total Assets was $3,070 Mil.
Property, Plant and Equipment(Net PPE) was $173 Mil.
Depreciation, Depletion and Amortization(DDA) was $75 Mil.
Selling, General & Admin. Expense(SGA) was $794 Mil.
Total Current Liabilities was $1,135 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)
=(284.582 / 1846.736) / (265.663 / 1595.11)
=0.15409999 / 0.16654839
=0.9253

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)
=(393.724 / 1595.11) / (409.604 / 1846.736)
=0.84892202 / 0.84829829
=1.0007

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 - (1700.914 + 168.391) / 3760.28) / (1 - (1308.901 + 172.792) / 3070.01)
=0.50288143 / 0.51736542
=0.972

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
=1846.736 / 1595.11
=1.1577

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))
=(75.397 / (75.397 + 172.792)) / (75.886 / (75.886 + 168.391))
=0.30378864 / 0.31065553
=0.9779

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)
=(921.274 / 1846.736) / (794.094 / 1595.11)
=0.49886611 / 0.49783024
=1.0021

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)
=((720.001 + 1244.986) / 3760.28) / ((0 + 1135.114) / 3070.01)
=0.52256401 / 0.36974277
=1.4133

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
=(190.542 - 5.852 - 666.867) / 3760.28
=-0.1282

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 -3.16 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

Feb06Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14Feb15
DSRI 0.85011.04851.10580.8120.94511.09031.10841.01231.03071.1131
GMI 0.97380.98490.99131.01010.98761.01570.99090.99221.00071.0013
AQI 0.47861.35910.95871.15110.93871.00361.1070.97980.94610.9963
SGI 1.41671.43941.30551.24771.14661.21521.24621.17271.15491.1661
DEPI 0.87630.9141.14620.87240.95491.00411.08461.17161.02030.976
SGAI 0.93711.12850.98950.97420.9850.96510.99111.03710.98121.0239
LVGI 0.90.83060.95660.54631.18841.02121.11291.01841.05491.4587
TATA -0.1042-0.1036-0.0898-0.0941-0.0956-0.084-0.0983-0.1122-0.1169-0.1181
M-score -2.93-2.37-2.52-2.67-2.94-2.59-2.61-2.84-2.89-2.94

Red Hat Inc Quarterly Data

Feb13May13Aug13Nov13Feb14May14Aug14Nov14Feb15May15
DSRI 1.01230.9990.92611.04831.03071.00721.04560.98381.11310.9253
GMI 0.99220.99881.00361.00311.00070.99780.99851.00051.00131.0007
AQI 0.97980.95470.98370.9120.94611.11351.08371.10490.99630.972
SGI 1.17271.16421.16731.15981.15491.15811.16611.16451.16611.1577
DEPI 1.17161.16191.09691.02731.02030.96810.97350.98960.9760.9779
SGAI 1.03221.02531.0040.98430.98591.00411.00551.0181.02391.0021
LVGI 1.01841.0941.0991.07281.05491.04051.03781.4761.45871.4133
TATA -0.1122-0.1234-0.1237-0.1112-0.1168-0.1268-0.1208-0.1168-0.1181-0.1282
M-score -2.84-2.95-3.00-2.87-2.89-2.90-2.84-3.01-2.94-3.16
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