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Dow Chemical Co (NYSE:DOW)
Beneish M-Score
-2.64 (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.

Dow Chemical Co has a M-score of -2.64 suggests that the company is not a manipulator.

DOW' s Beneish M-Score Range Over the Past 10 Years
Min: -3.13   Max: -1.08
Current: -2.64

-3.13
-1.08

During the past 13 years, the highest Beneish M-Score of Dow Chemical Co was -1.08. The lowest was -3.13. And the median was -2.68.


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 Dow Chemical 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 * 1.2221+0.528 * 0.8717+0.404 * 1.0612+0.892 * 0.8536+0.115 * 1.2579
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1239+4.679 * -0.0476-0.327 * 0.9376
=-2.64

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun16) TTM:Last Year (Jun15) TTM:
Accounts Receivable was $5,171 Mil.
Revenue was 11952 + 10703 + 11462 + 12036 = $46,153 Mil.
Gross Profit was 2677 + 2752 + 2656 + 2687 = $10,772 Mil.
Total Current Assets was $26,310 Mil.
Total Assets was $81,524 Mil.
Property, Plant and Equipment(Net PPE) was $22,783 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,532 Mil.
Selling, General & Admin. Expense(SGA) was $2,975 Mil.
Total Current Liabilities was $12,881 Mil.
Long-Term Debt was $20,852 Mil.
Net Income was 3208 + 254 + 3612 + 1375 = $8,449 Mil.
Non Operating Income was 2632 + -1202 + 3011 + 767 = $5,208 Mil.
Cash Flow from Operations was 2218 + 52 + 2341 + 2511 = $7,122 Mil.
Accounts Receivable was $4,957 Mil.
Revenue was 12910 + 12370 + 14384 + 14405 = $54,069 Mil.
Gross Profit was 2764 + 2835 + 2773 + 2629 = $11,001 Mil.
Total Current Assets was $24,764 Mil.
Total Assets was $69,334 Mil.
Property, Plant and Equipment(Net PPE) was $18,580 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,674 Mil.
Selling, General & Admin. Expense(SGA) was $3,101 Mil.
Total Current Liabilities was $12,765 Mil.
Long-Term Debt was $17,833 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)
=(5171 / 46153) / (4957 / 54069)
=0.11204039 / 0.09167915
=1.2221

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)
=(11001 / 54069) / (10772 / 46153)
=0.20346224 / 0.23339761
=0.8717

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 - (26310 + 22783) / 81524) / (1 - (24764 + 18580) / 69334)
=0.39780923 / 0.37485216
=1.0612

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
=46153 / 54069
=0.8536

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))
=(2674 / (2674 + 18580)) / (2532 / (2532 + 22783))
=0.12581161 / 0.10001975
=1.2579

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)
=(2975 / 46153) / (3101 / 54069)
=0.06445952 / 0.05735264
=1.1239

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)
=((20852 + 12881) / 81524) / ((17833 + 12765) / 69334)
=0.41377999 / 0.44131306
=0.9376

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
=(8449 - 5208 - 7122) / 81524
=-0.0476

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.

Dow Chemical Co has a M-score of -2.64 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 own currency.

Dow Chemical Co Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.91761.09390.59363.10770.82230.48481.09380.96760.93161.038
GMI 1.12131.16361.39950.74420.86770.98510.94270.9530.90320.8203
AQI 0.98471.00471.02961.29080.94211.01830.9910.95460.98610.9835
SGI 1.06081.08931.07190.78231.19611.11760.94671.00521.0190.8386
DEPI 1.0140.99390.97661.00330.9391.00511.07051.00221.00811.0675
SGAI 1.01471.02890.9841.6170.87710.95621.0841.05151.00791.1407
LVGI 0.94621.00361.13341.05051.01470.93080.9780.91791.06570.9134
TATA -0.0374-0.0624-0.1113-0.0447-0.0443-0.0295-0.0489-0.0953-0.0504-0.0749
M-score -2.60-2.52-3.13-1.08-2.76-2.96-2.70-2.98-2.84-3.03

Dow Chemical Co Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
DSRI 0.99590.96841.00020.93160.86630.95220.98341.0381.13861.2221
GMI 0.98050.99210.9170.90320.86560.82380.82360.82030.83630.8717
AQI 0.95820.98170.70380.98610.97260.96990.99650.98351.04361.0612
SGI 1.01251.01741.02751.0190.98110.94040.88880.83860.84010.8536
DEPI 1.01591.02480.99351.00811.01641.04271.10321.06751.09351.2579
SGAI 1.02311.01531.03771.00791.03541.07561.09481.14071.14471.1239
LVGI 0.93580.98041.37821.06571.05951.04940.98210.91340.91380.9376
TATA -0.0927-0.0509-0.0495-0.0504-0.0629-0.0639-0.0757-0.0749-0.045-0.0476
M-score -2.91-2.74-2.98-2.84-3.02-3.01-3.04-3.03-2.76-2.64
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