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Dow Chemical Co (NYSE:DOW)
Beneish M-Score
-2.50 (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 -2.50 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: -2.5

-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 * 1.1972+0.528 * 0.9293+0.404 * 1.0774+0.892 * 0.9014+0.115 * 1.1854
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1507+4.679 * -0.026-0.327 * 0.9349
=-2.50

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $4,746 Mil.
Revenue was 12483 + 11952 + 10703 + 11462 = $46,600 Mil.
Gross Profit was 2642 + 2677 + 2752 + 2656 = $10,727 Mil.
Total Current Assets was $24,778 Mil.
Total Assets was $80,624 Mil.
Property, Plant and Equipment(Net PPE) was $23,311 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,667 Mil.
Selling, General & Admin. Expense(SGA) was $3,150 Mil.
Total Current Liabilities was $12,655 Mil.
Long-Term Debt was $20,423 Mil.
Net Income was 804 + 3208 + 254 + 3612 = $7,878 Mil.
Non Operating Income was 66 + 2178 + -1200 + 2971 = $4,015 Mil.
Cash Flow from Operations was 1345 + 2218 + 52 + 2341 = $5,956 Mil.
Accounts Receivable was $4,398 Mil.
Revenue was 12036 + 12910 + 12370 + 14384 = $51,700 Mil.
Gross Profit was 2687 + 2764 + 2835 + 2773 = $11,059 Mil.
Total Current Assets was $24,852 Mil.
Total Assets was $69,884 Mil.
Property, Plant and Equipment(Net PPE) was $18,858 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,613 Mil.
Selling, General & Admin. Expense(SGA) was $3,037 Mil.
Total Current Liabilities was $13,205 Mil.
Long-Term Debt was $17,462 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)
=(4746 / 46600) / (4398 / 51700)
=0.10184549 / 0.0850677
=1.1972

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)
=(11059 / 51700) / (10727 / 46600)
=0.21390716 / 0.23019313
=0.9293

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 - (24778 + 23311) / 80624) / (1 - (24852 + 18858) / 69884)
=0.40353989 / 0.37453494
=1.0774

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
=46600 / 51700
=0.9014

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))
=(2613 / (2613 + 18858)) / (2667 / (2667 + 23311))
=0.12169904 / 0.10266379
=1.1854

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)
=(3150 / 46600) / (3037 / 51700)
=0.06759657 / 0.05874275
=1.1507

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)
=((20423 + 12655) / 80624) / ((17462 + 13205) / 69884)
=0.41027486 / 0.4388272
=0.9349

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
=(7878 - 4015 - 5956) / 80624
=-0.026

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 -2.50 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 local exchange's currency.

Dow Chemical Co Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.91761.09390.59363.10770.41970.94981.09380.96760.93161.038
GMI 1.12131.16361.39950.74420.86770.98510.94270.9530.90320.8203
AQI 0.98471.00471.02961.29080.93051.0310.9910.95460.98610.9835
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 -0.0374-0.0624-0.1113-0.0447-0.0419-0.0291-0.0264-0.0956-0.0497-0.0688
M-score -2.60-2.52-3.13-1.08-3.12-2.52-2.60-2.98-2.84-3.00

Dow Chemical Co Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 0.96841.00020.93160.86630.95220.98341.0381.13861.22211.1972
GMI 0.99210.9170.90320.86560.82380.82360.82030.83630.87170.9293
AQI 0.98170.70380.98610.97260.96990.99650.98351.04361.06121.0774
SGI 1.01741.02751.0190.98110.94040.88880.83860.84010.85360.9014
DEPI 1.02480.99351.00811.01641.04271.10321.06751.09351.25791.1854
SGAI 1.01531.03771.00791.03541.07561.09481.14071.14471.12391.1507
LVGI 0.98041.37821.06571.05951.04940.98210.91340.91380.93760.9349
TATA -0.0513-0.0498-0.0497-0.0622-0.0578-0.0696-0.0688-0.039-0.0416-0.026
M-score -2.74-2.98-2.84-3.02-2.98-3.01-3.00-2.73-2.62-2.50
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