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Red Hat, Inc. (NYSE:RHT)
Beneish M-Score
-2.86 (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 -2.88 suggests that the company is not a manipulator.

RHT' s 10-Year Beneish M-Score Range
Min: -4.52   Max: -2.09
Current: -2.86

-4.52
-2.09

During the past 13 years, the highest Beneish M-Score of Red Hat, Inc. was -2.09. The lowest was -4.52. And the median was -2.79.


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 * 1.0307+0.528 * 1.0007+0.404 * 0.9461+0.892 * 1.1549+0.115 * 1.0203
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9859+4.679 * -0.1168-0.327 * 1.0056
=-2.88

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

This Year (Feb14) TTM:Last Year (Feb13) TTM:
Accounts Receivable was $361 Mil.
Revenue was 400.397 + 396.536 + 374.423 + 363.259 = $1,535 Mil.
Gross Profit was 339.861 + 336.109 + 318.843 + 307.202 = $1,302 Mil.
Total Current Assets was $1,571 Mil.
Total Assets was $3,107 Mil.
Property, Plant and Equipment(Net PPE) was $174 Mil.
Depreciation, Depletion and Amortization(DDA) was $74 Mil.
Selling, General & Admin. Expense(SGA) was $752 Mil.
Total Current Liabilities was $1,148 Mil.
Long-Term Debt was $0 Mil.
Net Income was 45.069 + 52.025 + 40.808 + 40.391 = $178 Mil.
Non Operating Income was 0.283 + -0.44 + 1.196 + -0.424 = $1 Mil.
Cash Flow from Operations was 184.682 + 95.154 + 118.929 + 141.815 = $541 Mil.
Accounts Receivable was $303 Mil.
Revenue was 347.885 + 343.606 + 322.595 + 314.731 = $1,329 Mil.
Gross Profit was 294.28 + 290.488 + 274.737 + 268.712 = $1,128 Mil.
Total Current Assets was $1,369 Mil.
Total Assets was $2,814 Mil.
Property, Plant and Equipment(Net PPE) was $142 Mil.
Depreciation, Depletion and Amortization(DDA) was $62 Mil.
Selling, General & Admin. Expense(SGA) was $661 Mil.
Total Current Liabilities was $986 Mil.
Long-Term Debt was $48 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)
=(360.594 / 1534.615) / (302.942 / 1328.817)
=0.23497359 / 0.22797872
=1.0307

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)
=(336.109 / 1328.817) / (339.861 / 1534.615)
=0.84903866 / 0.84843104
=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 - (1571.182 + 173.917) / 3106.619) / (1 - (1368.749 + 141.586) / 2813.66)
=0.43826424 / 0.46321339
=0.9461

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
=1534.615 / 1328.817
=1.1549

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))
=(62.341 / (62.341 + 141.586)) / (74.405 / (74.405 + 173.917))
=0.30570253 / 0.29963112
=1.0203

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)
=(752.462 / 1534.615) / (660.887 / 1328.817)
=0.49032624 / 0.4973499
=0.9859

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)
=((0 + 1148.086) / 3106.619) / ((48.321 + 985.712) / 2813.66)
=0.36956125 / 0.3675046
=1.0056

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
=(178.293 - 0.615 - 540.58) / 3106.619
=-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 -2.88 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 0.77310.81231.02221.10580.8120.94511.09031.10841.01231.0307
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 1.05490.90.83060.95660.54631.18841.02121.11291.06831.0056
TATA -0.0893-0.1042-0.1036-0.0898-0.0941-0.0956-0.084-0.0983-0.1122-0.1168
M-score -2.44-2.96-2.39-2.52-2.67-2.94-2.59-2.61-2.86-2.88

Red Hat, Inc. Quarterly Data

Nov11Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14
DSRI 1.08391.10841.03081.02791.04381.01230.9990.92611.04831.0307
GMI 1.00270.99080.98660.98080.98470.99220.99881.00361.00311.0007
AQI 1.12521.1071.13731.14420.97270.97980.95470.98370.9120.9461
SGI 1.25631.24621.22621.19281.18231.17271.16421.16731.15981.1549
DEPI 1.02331.08461.13141.18161.21951.17161.16191.09691.02731.0203
SGAI 0.96840.99110.99341.02551.04541.03221.02531.0040.98430.9859
LVGI 1.01721.11291.06421.05851.08741.06831.0941.0991.07281.0056
TATA -0.0898-0.0983-0.1112-0.1178-0.1178-0.1122-0.1234-0.1237-0.1111-0.1168
M-score -2.54-2.61-2.73-2.79-2.86-2.86-2.95-3.00-2.86-2.88
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