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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.
Two Harbors Investment Corp has a M-score of -2.03 signals that the company is a manipulator.
During the past 7 years, the highest Beneish M-Score of Two Harbors Investment Corp was 8.40. The lowest was -3.15. And the median was -1.84.
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 Two Harbors Investment Corp 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 * 1.4607||+||0.528 * 0.9959||+||0.404 * 1.4329||+||0.892 * 1.019||+||0.115 * 1|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.6956||+||4.679 * -0.0067||-||0.327 * 1.042|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $80.5 Mil.|
Revenue was 140.149 + 138.535 + 137.457 + 137.974 = $554.1 Mil.
Gross Profit was 140.149 + 138.323 + 137.457 + 137.974 = $553.9 Mil.
Total Current Assets was $16,865.3 Mil.
Total Assets was $17,814.7 Mil.
Property, Plant and Equipment(Net PPE) was $0.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.4 Mil.
Selling, General & Admin. Expense(SGA) was $77.3 Mil.
Total Current Liabilities was $269.8 Mil.
Long-Term Debt was $561.9 Mil.
Net Income was 39.657 + -29.145 + 239.414 + -192.728 = $57.2 Mil.
Non Operating Income was -65.432 + -143.422 + 162.021 + -258.742 = $-305.6 Mil.
Cash Flow from Operations was -203.056 + 456.25 + 48.824 + 180.777 = $482.8 Mil.
|Accounts Receivable was $54.1 Mil.
Revenue was 145.325 + 134.835 + 137.332 + 126.309 = $543.8 Mil.
Gross Profit was 145.325 + 134.599 + 135.69 + 125.75 = $541.4 Mil.
Total Current Assets was $18,910.3 Mil.
Total Assets was $19,640.8 Mil.
Property, Plant and Equipment(Net PPE) was $0.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.9 Mil.
Selling, General & Admin. Expense(SGA) was $44.7 Mil.
Total Current Liabilities was $517.0 Mil.
Long-Term Debt was $363.0 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(80.491 / 554.115)||/||(54.08 / 543.801)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(138.323 / 543.801)||/||(140.149 / 554.115)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (16865.332 + 0) / 17814.669)||/||(1 - (18910.304 + 0) / 19640.751)|
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.
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))|
|=||(1.91 / (1.91 + 0))||/||(2.414 / (2.414 + 0))|
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)|
|=||(77.309 / 554.115)||/||(44.745 / 543.801)|
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)|
|=||((561.921 + 269.782) / 17814.669)||/||((363.012 + 516.959) / 19640.751)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(57.198 - -305.575||-||482.795)||/||17814.669|
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.
Two Harbors Investment Corp has a M-score of -2.03 signals that the company is likely to be a manipulator.
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
Two Harbors Investment Corp Annual Data
Two Harbors Investment Corp Quarterly Data