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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.
Dow Chemical Co has a M-score of -2.70 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Dow Chemical Co was -1.95. The lowest was -3.17. And the median was -2.60.
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 * 0.9717||+||0.528 * 0.9921||+||0.404 * 0.9817||+||0.892 * 1.0174||+||0.115 * 1.0248|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0153||+||4.679 * -0.0443||-||0.327 * 0.9804|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $10,359 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.
Net Income was 967 + 1049 + 1048 + 679 = $3,743 Mil.
Non Operating Income was -202 + 280 + 728 + 381 = $1,187 Mil.
Cash Flow from Operations was 1395 + 575 + 2233 + 1402 = $5,605 Mil.
|Accounts Receivable was $10,478 Mil.
Revenue was 14577 + 14383 + 13917 + 13637 = $56,514 Mil.
Gross Profit was 2474 + 2676 + 1978 + 2269 = $9,397 Mil.
Total Current Assets was $25,327 Mil.
Total Assets was $70,142 Mil.
Property, Plant and Equipment(Net PPE) was $17,202 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,672 Mil.
Selling, General & Admin. Expense(SGA) was $2,968 Mil.
Total Current Liabilities was $12,613 Mil.
Long-Term Debt was $17,475 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)|
|=||(10359 / 57498)||/||(10478 / 56514)|
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)|
|=||(2728 / 56514)||/||(2573 / 57498)|
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 - (24283 + 17901) / 68756)||/||(1 - (25327 + 17202) / 70142)|
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))|
|=||(2672 / (2672 + 17202))||/||(2703 / (2703 + 17901))|
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)|
|=||(3066 / 57498)||/||(2968 / 56514)|
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)|
|=||((17036 + 11879) / 68756)||/||((17475 + 12613) / 70142)|
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|
|=||(3743 - 1187||-||5605)||/||68756|
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 -2.70 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
Dow Chemical Co Annual Data
Dow Chemical Co Quarterly Data