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Beneish M-Score 15.23 higher than -2.22, which implies that it might have manipulated its financial results.
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.
During the past 8 years, the highest Beneish M-Score of Two Harbors Investment Corp was 15.23. The lowest was -2.51. And the median was -1.67.
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 * 0.7121||+||0.528 * 1||+||0.404 * 0.6804||+||0.892 * 1.0757||+||0.115 * 161.5843|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1249||+||4.679 * 0.0992||-||0.327 * 3.6809|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $93.2 Mil.|
Revenue was 162.969 + 156.22 + 142.303 + 140.149 = $601.6 Mil.
Gross Profit was 162.969 + 156.22 + 142.303 + 140.149 = $601.6 Mil.
Total Current Assets was $20,646.4 Mil.
Total Assets was $21,678.1 Mil.
Property, Plant and Equipment(Net PPE) was $213.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.3 Mil.
Selling, General & Admin. Expense(SGA) was $62.3 Mil.
Total Current Liabilities was $3,061.8 Mil.
Long-Term Debt was $1,400.6 Mil.
Net Income was 94.793 + -36.963 + 193.59 + 39.657 = $291.1 Mil.
Non Operating Income was -7.1 + -143.39 + 111.697 + -65.432 = $-104.2 Mil.
Cash Flow from Operations was -513.416 + -408.233 + -609.108 + -224.635 = $-1,755.4 Mil.
|Accounts Receivable was $121.7 Mil.
Revenue was 138.535 + 137.457 + 137.974 + 145.325 = $559.3 Mil.
Gross Profit was 138.535 + 137.457 + 137.974 + 145.325 = $559.3 Mil.
Total Current Assets was $16,458.8 Mil.
Total Assets was $17,425.8 Mil.
Property, Plant and Equipment(Net PPE) was $0.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.2 Mil.
Selling, General & Admin. Expense(SGA) was $51.5 Mil.
Total Current Liabilities was $315.6 Mil.
Long-Term Debt was $659.0 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)|
|=||(93.239 / 601.641)||/||(121.721 / 559.291)|
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)|
|=||(156.22 / 559.291)||/||(162.969 / 601.641)|
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 - (20646.368 + 213.256) / 21678.055)||/||(1 - (16458.828 + 0) / 17425.798)|
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))|
|=||(2.167 / (2.167 + 0))||/||(1.328 / (1.328 + 213.256))|
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)|
|=||(62.295 / 601.641)||/||(51.482 / 559.291)|
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)|
|=||((1400.571 + 3061.808) / 21678.055)||/||((658.953 + 315.564) / 17425.798)|
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|
|=||(291.077 - -104.225||-||-1755.392)||/||21678.055|
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 15.23 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