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Dow Chemical Co (NYSE:DOW)
Beneish M-Score
-3.01 (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 -3.01 suggests that the company is not a manipulator.

DOW' s 10-Year Beneish M-Score Range
Min: -3.13   Max: -1.08
Current: -3.01

-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 -2.64.


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 * 0.9522+0.528 * 0.8238+0.404 * 0.9699+0.892 * 0.9404+0.115 * 1.0427
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0756+4.679 * -0.0639-0.327 * 1.0494
=-3.01

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

This Year (Jun15) TTM:Last Year (Jun14) TTM:
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.
Net Income was 1220 + 1478 + 819 + 937 = $4,454 Mil.
Non Operating Income was 657 + 831 + -8 + 206 = $1,686 Mil.
Cash Flow from Operations was 1406 + 1258 + 2757 + 1775 = $7,196 Mil.
Accounts Receivable was $5,536 Mil.
Revenue was 14917 + 14461 + 14386 + 13734 = $57,498 Mil.
Gross Profit was 2573 + 2728 + 2318 + 2018 = $9,637 Mil.
Total Current Assets was $24,283 Mil.
Total Assets was $68,756 Mil.
Property, Plant and Equipment(Net PPE) was $17,901 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,703 Mil.
Selling, General & Admin. Expense(SGA) was $3,066 Mil.
Total Current Liabilities was $11,879 Mil.
Long-Term Debt was $17,036 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)
=(4957 / 54069) / (5536 / 57498)
=0.09167915 / 0.09628161
=0.9522

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)
=(2835 / 57498) / (2764 / 54069)
=0.16760583 / 0.20346224
=0.8238

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 - (24764 + 18580) / 69334) / (1 - (24283 + 17901) / 68756)
=0.37485216 / 0.38646809
=0.9699

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
=54069 / 57498
=0.9404

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))
=(2703 / (2703 + 17901)) / (2674 / (2674 + 18580))
=0.13118812 / 0.12581161
=1.0427

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)
=(3101 / 54069) / (3066 / 57498)
=0.05735264 / 0.05332359
=1.0756

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)
=((17833 + 12765) / 69334) / ((17036 + 11879) / 68756)
=0.44131306 / 0.42054512
=1.0494

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
=(4454 - 1686 - 7196) / 69334
=-0.0639

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 -3.01 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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.9350.91761.09390.59363.10770.82230.48481.09380.96760.9316
GMI 0.84951.12131.16361.39950.74420.86770.98510.94270.9530.9032
AQI 0.92640.98471.00471.02961.29080.94211.01830.9910.95460.9882
SGI 1.1531.06081.08931.07190.78231.19611.11760.94671.00521.019
DEPI 0.98541.0140.99390.97661.00330.9391.00511.07051.00221.0081
SGAI 0.93311.01471.02890.9841.6170.87710.95621.0841.05151.0079
LVGI 0.89580.94621.00361.13341.05051.01470.93080.9780.91791.0678
TATA -0.0365-0.0374-0.0624-0.1113-0.0447-0.0072-0.0033-0.0489-0.0953-0.0503
M-score -2.64-2.60-2.52-3.13-1.08-2.59-2.83-2.70-2.98-2.84

Dow Chemical Co Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
DSRI 1.0621.10650.95310.96760.99590.96841.00020.93160.86630.9522
GMI 0.89420.88420.94310.9530.98050.99210.9170.90320.86560.8238
AQI 0.98230.95791.30690.95460.95820.98170.70380.98820.97260.9699
SGI 0.94130.96710.99381.00521.01251.01741.02751.0190.98110.9404
DEPI 1.04551.03591.01811.00221.01591.02480.99351.00811.01641.0427
SGAI 1.11221.10641.04371.05151.02311.01531.03771.00791.03541.0756
LVGI 0.8990.95470.72520.91790.93580.98041.37821.06781.05951.0494
TATA -0.0545-0.0856-0.0707-0.0887-0.0861-0.0509-0.0495-0.0503-0.0629-0.0639
M-score -2.77-2.89-2.68-2.95-2.88-2.74-2.98-2.84-3.02-3.01
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