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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.
During the past 13 years, the highest Beneish M-Score of Clorox Co was -2.15. The lowest was -3.70. And the median was -2.69.
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 Clorox Co 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 * 0.9787||+||0.528 * 0.9542||+||0.404 * 1.1018||+||0.892 * 1.0239||+||0.115 * 0.9885|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0451||+||4.679 * -0.0283||-||0.327 * 0.9977|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $474 Mil.|
Revenue was 1345 + 1390 + 1557 + 1401 = $5,693 Mil.
Gross Profit was 600 + 625 + 710 + 605 = $2,540 Mil.
Total Current Assets was $1,490 Mil.
Total Assets was $4,175 Mil.
Property, Plant and Equipment(Net PPE) was $878 Mil.
Depreciation, Depletion and Amortization(DDA) was $166 Mil.
Selling, General & Admin. Expense(SGA) was $1,328 Mil.
Total Current Liabilities was $1,358 Mil.
Long-Term Debt was $1,796 Mil.
Net Income was 149 + 172 + 191 + 174 = $686 Mil.
Non Operating Income was 3 + 1 + 17 + 1 = $22 Mil.
Cash Flow from Operations was 38 + 147 + 379 + 218 = $782 Mil.
|Accounts Receivable was $473 Mil.
Revenue was 1345 + 1352 + 1497 + 1366 = $5,560 Mil.
Gross Profit was 572 + 578 + 642 + 575 = $2,367 Mil.
Total Current Assets was $1,905 Mil.
Total Assets was $4,674 Mil.
Property, Plant and Equipment(Net PPE) was $933 Mil.
Depreciation, Depletion and Amortization(DDA) was $174 Mil.
Selling, General & Admin. Expense(SGA) was $1,241 Mil.
Total Current Liabilities was $1,744 Mil.
Long-Term Debt was $1,795 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)|
|=||(474 / 5693)||/||(473 / 5560)|
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)|
|=||(625 / 5560)||/||(600 / 5693)|
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 - (1490 + 878) / 4175)||/||(1 - (1905 + 933) / 4674)|
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))|
|=||(174 / (174 + 933))||/||(166 / (166 + 878))|
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)|
|=||(1328 / 5693)||/||(1241 / 5560)|
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)|
|=||((1796 + 1358) / 4175)||/||((1795 + 1744) / 4674)|
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|
|=||(686 - 22||-||782)||/||4175|
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.
Clorox Co has a M-score of -2.60 suggests that the company will not 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
Clorox Co Annual Data
Clorox Co Quarterly Data