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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 -2.67.
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 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 * 1.0508||+||0.528 * 0.9921||+||0.404 * 1.0698||+||0.892 * 1.032||+||0.115 * 1.0302|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0362||+||4.679 * -0.0412||-||0.327 * 0.9931|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $514 Mil.|
Revenue was 1406 + 1443 + 1600 + 1426 = $5,875 Mil.
Gross Profit was 629 + 640 + 727 + 646 = $2,642 Mil.
Total Current Assets was $1,549 Mil.
Total Assets was $4,568 Mil.
Property, Plant and Equipment(Net PPE) was $904 Mil.
Depreciation, Depletion and Amortization(DDA) was $165 Mil.
Selling, General & Admin. Expense(SGA) was $1,420 Mil.
Total Current Liabilities was $2,037 Mil.
Long-Term Debt was $1,390 Mil.
Net Income was 149 + 179 + 165 + 162 = $655 Mil.
Non Operating Income was -23 + 5 + 0 + -2 = $-20 Mil.
Cash Flow from Operations was 100 + 170 + 331 + 262 = $863 Mil.
|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.
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)|
|=||(514 / 5875)||/||(474 / 5693)|
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)|
|=||(2540 / 5693)||/||(2642 / 5875)|
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 - (1549 + 904) / 4568)||/||(1 - (1490 + 878) / 4175)|
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))|
|=||(166 / (166 + 878))||/||(165 / (165 + 904))|
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)|
|=||(1420 / 5875)||/||(1328 / 5693)|
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)|
|=||((1390 + 2037) / 4568)||/||((1796 + 1358) / 4175)|
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|
|=||(655 - -20||-||863)||/||4568|
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 -2.57 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