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GuruFocus has detected 6 Warning Signs with Canon Inc $CAJ.
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Canon Inc (NYSE:CAJ)
Beneish M-Score
-2.74 (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.

Canon Inc has a M-score of -2.75 suggests that the company is not a manipulator.

CAJ' s Beneish M-Score Range Over the Past 10 Years
Min: -3.07   Max: -1.97
Current: -2.74

-3.07
-1.97

During the past 13 years, the highest Beneish M-Score of Canon Inc was -1.97. The lowest was -3.07. And the median was -2.72.


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 Canon 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 * 1.034+0.528 * 1.0115+0.404 * 1.4547+0.892 * 0.9956+0.115 * 1.0514
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0253+4.679 * -0.0684-0.327 * 1.5146
=-2.75

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $4,328 Mil.
Revenue was 7651.8480748 + 8165.53062195 + 7059.39961942 + 8571.85842891 = $31,449 Mil.
Gross Profit was 3700.0991312 + 4104.07504824 + 3583.98926077 + 4298.17075677 = $15,686 Mil.
Total Current Assets was $16,797 Mil.
Total Assets was $44,507 Mil.
Property, Plant and Equipment(Net PPE) was $11,200 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,338 Mil.
Selling, General & Admin. Expense(SGA) was $10,580 Mil.
Total Current Liabilities was $13,358 Mil.
Long-Term Debt was $7 Mil.
Net Income was 239.535959868 + 507.333112484 + 247.857775983 + 566.481687014 = $1,561 Mil.
Non Operating Income was 44.3781604825 + 107.374497987 + 42.0342561035 + 6.5441690303 = $200 Mil.
Cash Flow from Operations was 1003.65184022 + 1201.55594304 + 1014.96745378 + 1182.98187199 = $4,403 Mil.
Accounts Receivable was $4,204 Mil.
Revenue was 7705.37239196 + 7875.98631087 + 7121.9615514 + 8882.89210909 = $31,586 Mil.
Gross Profit was 3905.35474699 + 4072.08778632 + 3642.72454306 + 4316.12266841 = $15,936 Mil.
Total Current Assets was $17,024 Mil.
Total Assets was $36,614 Mil.
Property, Plant and Equipment(Net PPE) was $10,254 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,275 Mil.
Selling, General & Admin. Expense(SGA) was $10,364 Mil.
Total Current Liabilities was $7,251 Mil.
Long-Term Debt was $8 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)
=(4327.82855509 / 31448.6367451) / (4203.76270521 / 31586.2123633)
=0.13761578 / 0.13308853
=1.034

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)
=(15936.2897448 / 31586.2123633) / (15686.334197 / 31448.6367451)
=0.5045331 / 0.49879218
=1.0115

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 - (16796.7653165 + 11200.4896629) / 44506.8247264) / (1 - (17023.6359278 + 10254.2705805) / 36614.3143933)
=0.37094468 / 0.25499338
=1.4547

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
=31448.6367451 / 31586.2123633
=0.9956

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))
=(2274.62570339 / (2274.62570339 + 10254.2705805)) / (2337.62070601 / (2337.62070601 + 11200.4896629))
=0.18155037 / 0.17266964
=1.0514

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)
=(10580.0482659 / 31448.6367451) / (10363.974007 / 31586.2123633)
=0.33642311 / 0.32811702
=1.0253

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)
=((6.72991807184 + 13358.3273648) / 44506.8247264) / ((8.08172614351 + 7251.25595518) / 36614.3143933)
=0.30029231 / 0.19826502
=1.5146

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
=(1561.20853535 - 200.331083603 - 4403.15710903) / 44506.8247264
=-0.0684

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.

Canon Inc has a M-score of -2.75 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 local exchange's currency.

Canon Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.96690.82061.19250.86720.99661.06630.99481.0450.92241.2304
GMI 0.98861.05921.06430.92470.98531.02960.98380.96510.98121.0344
AQI 1.14161.15541.05461.12350.91261.03831.03141.12111.45091.3804
SGI 1.12861.12180.79541.24671.0280.90820.86840.86611.00020.9386
DEPI 0.85680.99641.011.06481.03821.05870.95991.03030.93881.0578
SGAI 0.99591.04171.0821.0321.01421.00161.04591.03071.03171.0207
LVGI 1.07540.85560.85431.10351.00920.93760.93581.03260.89131.6835
TATA -0.0734-0.069-0.124-0.1253-0.0534-0.0436-0.0663-0.0766-0.0546-0.0704
M-score -2.73-2.73-2.97-2.99-2.75-2.65-2.90-2.90-2.61-2.70

Canon Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.00650.98890.93061.00340.98711.01971.08370.98231.0341.1577
GMI 0.96180.9640.96870.98580.98240.98250.99060.99411.01151.0341
AQI 1.08131.12111.12161.54611.45321.45092.02211.43571.45471.3804
SGI 0.91220.91530.88230.87030.88510.90480.940.98440.99560.9975
DEPI 1.03970.98530.97180.95730.98981.0191.06651.0731.05141.004
SGAI 1.03351.03061.04921.04691.03731.03171.02481.02871.02531.021
LVGI 0.981.03261.03871.00981.00420.89131.46961.47351.51461.6835
TATA -0.0803-0.0841-0.0802-0.0667-0.0657-0.0547-0.0539-0.061-0.0684-0.0748
M-score -2.91-2.95-3.02-2.71-2.74-2.60-2.45-2.77-2.75-2.74
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