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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.
Clorox Company has a M-score of -2.58 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Clorox Company 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 Company 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 * 0.9681||+||0.528 * 0.9966||+||0.404 * 1.0244||+||0.892 * 1.0087||+||0.115 * 0.9431|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9921||+||4.679 * -0.0189||-||0.327 * 0.9707|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $499 Mil.|
Revenue was 1330 + 1364 + 1547 + 1413 = $5,654 Mil.
Gross Profit was 557 + 585 + 680 + 595 = $2,417 Mil.
Total Current Assets was $1,500 Mil.
Total Assets was $4,388 Mil.
Property, Plant and Equipment(Net PPE) was $992 Mil.
Depreciation, Depletion and Amortization(DDA) was $181 Mil.
Selling, General & Admin. Expense(SGA) was $1,311 Mil.
Total Current Liabilities was $1,181 Mil.
Long-Term Debt was $2,170 Mil.
Net Income was 115 + 136 + 183 + 133 = $567 Mil.
Non Operating Income was 4 + -2 + -11 + -1 = $-10 Mil.
Cash Flow from Operations was 32 + 178 + 290 + 160 = $660 Mil.
|Accounts Receivable was $511 Mil.
Revenue was 1325 + 1338 + 1541 + 1401 = $5,605 Mil.
Gross Profit was 563 + 574 + 658 + 593 = $2,388 Mil.
Total Current Assets was $1,552 Mil.
Total Assets was $4,502 Mil.
Property, Plant and Equipment(Net PPE) was $1,051 Mil.
Depreciation, Depletion and Amortization(DDA) was $179 Mil.
Selling, General & Admin. Expense(SGA) was $1,310 Mil.
Total Current Liabilities was $1,373 Mil.
Long-Term Debt was $2,169 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)|
|=||(499 / 5654)||/||(511 / 5605)|
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)|
|=||(585 / 5605)||/||(557 / 5654)|
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 - (1500 + 992) / 4388)||/||(1 - (1552 + 1051) / 4502)|
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))|
|=||(179 / (179 + 1051))||/||(181 / (181 + 992))|
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)|
|=||(1311 / 5654)||/||(1310 / 5605)|
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)|
|=||((2170 + 1181) / 4388)||/||((2169 + 1373) / 4502)|
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|
|=||(567 - -10||-||660)||/||4388|
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 Company has a M-score of -2.58 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 Company Annual Data
Clorox Company Quarterly Data