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Red Hat Inc (NYSE:RHT)
Beneish M-Score
-2.94 (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 -2.94 suggests that the company is not a manipulator.

RHT' s Beneish M-Score Range Over the Past 10 Years
Min: -5.01   Max: -1.76
Current: -2.94

-5.01
-1.76

During the past 13 years, the highest Beneish M-Score of Red Hat Inc was -1.76. The lowest was -5.01. 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 * 0.9777+0.528 * 0.9985+0.404 * 1.0707+0.892 * 1.143+0.115 * 0.9505
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0079+4.679 * -0.127-0.327 * 0.9859
=-2.94

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

This Year (Nov15) TTM:Last Year (Nov14) TTM:
Accounts Receivable was $397 Mil.
Revenue was 523.58 + 504.148 + 481.001 + 463.941 = $1,973 Mil.
Gross Profit was 442.532 + 428.184 + 409.604 + 393.724 = $1,674 Mil.
Total Current Assets was $1,774 Mil.
Total Assets was $3,899 Mil.
Property, Plant and Equipment(Net PPE) was $161 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $993 Mil.
Total Current Liabilities was $1,312 Mil.
Long-Term Debt was $729 Mil.
Net Income was 46.848 + 51.395 + 48.086 + 47.7 = $194 Mil.
Non Operating Income was 0.049 + -1.245 + -0.203 + 4.785 = $3 Mil.
Cash Flow from Operations was 139.603 + 120.277 + 208.758 + 217.384 = $686 Mil.
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.



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)
=(396.545 / 1972.67) / (354.87 / 1725.945)
=0.20101943 / 0.2056091
=0.9777

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)
=(428.184 / 1725.945) / (442.532 / 1972.67)
=0.84731958 / 0.84861837
=0.9985

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 - (1773.941 + 161.015) / 3899.205) / (1 - (1705.017 + 173.599) / 3547.871)
=0.50375628 / 0.47049484
=1.0707

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
=1972.67 / 1725.945
=1.143

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))
=(76.193 / (76.193 + 173.599)) / (76.092 / (76.092 + 161.015))
=0.30502578 / 0.3209184
=0.9505

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)
=(993.296 / 1972.67) / (862.279 / 1725.945)
=0.50352872 / 0.49959819
=1.0079

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)
=((729.285 + 1311.534) / 3899.205) / ((710.844 + 1172.621) / 3547.871)
=0.52339361 / 0.53087189
=0.9859

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
=(194.029 - 3.386 - 686.022) / 3899.205
=-0.127

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 -2.94 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

Aug13Nov13Feb14May14Aug14Nov14Feb15May15Aug15Nov15
DSRI 0.92611.04831.03071.00721.04560.98381.11310.92530.93080.9777
GMI 1.00361.00311.00070.99780.99851.00051.00131.00071.00010.9985
AQI 0.98370.9120.94611.11351.08371.10490.99630.9720.99491.0707
SGI 1.16731.15981.15491.15811.16611.16451.16611.15771.1431.143
DEPI 1.09691.02731.02030.96810.97350.98960.9760.97790.970.9505
SGAI 1.0040.98430.98591.00411.00551.0181.02391.00211.00471.0079
LVGI 1.0991.07281.05491.04051.03781.4761.45871.41331.41380.9859
TATA -0.1237-0.1112-0.1168-0.1268-0.1209-0.1169-0.1181-0.1283-0.1287-0.127
M-score -3.00-2.87-2.89-2.90-2.84-3.01-2.94-3.16-3.16-2.94
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