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# HG Holdings (OTCPK:STLY) Beneish M-Score

: -1.74 (As of Today)
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Note: Financial institutions were excluded from the sample in Beneish paper when calculating Beneish M-Score. Thus, the prediction might not fit banks and insurance companies.

The zones of discrimination for M-Score is as such:

An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator.
An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.

Warning Sign:

Beneish M-Score -1.74 higher than -1.78, which implies that the company might have manipulated its financial results.

The historical rank and industry rank for HG Holdings's Beneish M-Score or its related term are showing as below:

STLY' s Beneish M-Score Range Over the Past 10 Years
Min: -6.01   Med: -2.6   Max: 3.5
Current: -1.74

During the past 13 years, the highest Beneish M-Score of HG Holdings was 3.50. The lowest was -6.01. And the median was -2.60.

## HG Holdings Beneish M-Score Calculation

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski 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 HG Holdings 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 * 0.1202 + 0.528 * 1 + 0.404 * 0.9944 + 0.892 * 3.2322 + 0.115 * 0.4144 - 0.172 * SGAI + 4.679 * TATA - 0.327 * LVGI - 0.172 * 0.6604 + 4.679 * -0.090459 - 0.327 * 1.0088 = -1.74

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

 This Year (Mar23) TTM: Last Year (Mar22) TTM: Total Receivables was \$0.56 Mil. Revenue was 2.197 + 5.475 + 6.116 + 2.179 = \$15.97 Mil. Gross Profit was 2.197 + 5.475 + 6.116 + 2.179 = \$15.97 Mil. Total Current Assets was \$15.27 Mil. Total Assets was \$51.45 Mil. Property, Plant and Equipment(Net PPE) was \$0.81 Mil. Depreciation, Depletion and Amortization(DDA) was \$0.14 Mil. Selling, General, & Admin. Expense(SGA) was \$10.91 Mil. Total Current Liabilities was \$1.02 Mil. Long-Term Debt & Capital Lease Obligation was \$0.35 Mil. Net Income was -0.799 + 1.817 + 2.864 + -0.363 = \$3.52 Mil. Non Operating Income was 0 + 0 + 0 + 0 = \$0.00 Mil. Cash Flow from Operations was 10.844 + -8.178 + 12.141 + -6.634 = \$8.17 Mil. Total Receivables was \$1.44 Mil. Revenue was 1.737 + 1.707 + 1.24 + 0.256 = \$4.94 Mil. Gross Profit was 1.737 + 1.707 + 1.24 + 0.256 = \$4.94 Mil. Total Current Assets was \$12.86 Mil. Total Assets was \$44.16 Mil. Property, Plant and Equipment(Net PPE) was \$0.77 Mil. Depreciation, Depletion and Amortization(DDA) was \$0.05 Mil. Selling, General, & Admin. Expense(SGA) was \$5.11 Mil. Total Current Liabilities was \$0.67 Mil. Long-Term Debt & Capital Lease Obligation was \$0.50 Mil.

1. DSRI = Days Sales in Receivables Index

Measured as the ratio of Revenue in Total 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) = (0.558 / 15.967) / (1.436 / 4.94) = 0.034947 / 0.290688 = 0.1202

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) = (4.94 / 4.94) / (15.967 / 15.967) = 1 / 1 = 1

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 Property, Plant and Equipment to Total Assets.

 AQI = (1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1) = (1 - (15.271 + 0.813) / 51.449) / (1 - (12.863 + 0.771) / 44.155) = 0.68738 / 0.691224 = 0.9944

4. SGI = Sales Growth Index

Ratio of Revenue 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 = 15.967 / 4.94 = 3.2322

5. DEPI = Depreciation Index

Measured as the ratio of the rate of Depreciation, Depletion and Amortization 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)) = (0.049 / (0.049 + 0.771)) / (0.137 / (0.137 + 0.813)) = 0.059756 / 0.144211 = 0.4144

Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.

6. SGAI = Sales, General and Administrative expenses Index

The ratio of Selling, General, & Admin. Expense(SGA) to Sales 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) = (10.908 / 15.967) / (5.11 / 4.94) = 0.683159 / 1.034413 = 0.6604

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 in leverage

 LVGI = ((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1) = ((0.35 + 1.017) / 51.449) / ((0.498 + 0.665) / 44.155) = 0.02657 / 0.026339 = 1.0088

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 = (3.519 - 0 - 8.173) / 51.449 = -0.090459

An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.

HG Holdings has a M-score of -1.74 signals that the company is likely to be a manipulator.

## HG Holdings Beneish M-Score Related Terms

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