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Dow Chemical Co (NYSE:DOW)
Beneish M-Score
-2.95 (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 -2.95 suggests that the company is not a manipulator.

DOW' s 10-Year Beneish M-Score Range
Min: -3.07   Max: -2.13
Current: -2.95

-3.07
-2.13

During the past 13 years, the highest Beneish M-Score of Dow Chemical Co was -2.13. The lowest was -3.07. And the median was -2.60.


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 * 0.9916+0.528 * 0.953+0.404 * 0.9546+0.892 * 1.0052+0.115 * 1.0022
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0515+4.679 * -0.0953-0.327 * 0.9179
=-2.95

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $9,647 Mil.
Revenue was 14386 + 13734 + 14577 + 14383 = $57,080 Mil.
Gross Profit was 2318 + 2018 + 2474 + 2676 = $9,486 Mil.
Total Current Assets was $24,977 Mil.
Total Assets was $69,501 Mil.
Property, Plant and Equipment(Net PPE) was $17,454 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,681 Mil.
Selling, General & Admin. Expense(SGA) was $3,024 Mil.
Total Current Liabilities was $11,971 Mil.
Long-Term Debt was $16,820 Mil.
Net Income was 1048 + 679 + 2425 + 635 = $4,787 Mil.
Non Operating Income was 728 + 381 + 2281 + 198 = $3,588 Mil.
Cash Flow from Operations was 2233 + 1402 + 3741 + 447 = $7,823 Mil.
Accounts Receivable was $9,679 Mil.
Revenue was 13917 + 13637 + 14513 + 14719 = $56,786 Mil.
Gross Profit was 1978 + 2269 + 2313 + 2434 = $8,994 Mil.
Total Current Assets was $23,684 Mil.
Total Assets was $69,605 Mil.
Property, Plant and Equipment(Net PPE) was $17,520 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,698 Mil.
Selling, General & Admin. Expense(SGA) was $2,861 Mil.
Total Current Liabilities was $11,493 Mil.
Long-Term Debt was $19,919 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)
=(9647 / 57080) / (9679 / 56786)
=0.16900841 / 0.17044694
=0.9916

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)
=(2018 / 56786) / (2318 / 57080)
=0.15838411 / 0.16618781
=0.953

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 - (24977 + 17454) / 69501) / (1 - (23684 + 17520) / 69605)
=0.3894908 / 0.40803103
=0.9546

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
=57080 / 56786
=1.0052

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))
=(2698 / (2698 + 17520)) / (2681 / (2681 + 17454))
=0.13344544 / 0.13315123
=1.0022

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)
=(3024 / 57080) / (2861 / 56786)
=0.05297828 / 0.05038214
=1.0515

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)
=((16820 + 11971) / 69501) / ((19919 + 11493) / 69605)
=0.41425303 / 0.45128942
=0.9179

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
=(4787 - 3588 - 7823) / 69501
=-0.0953

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 -2.95 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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.02710.93440.95721.10460.66051.71430.82230.95241.06220.9916
GMI 0.92660.84951.12131.16361.39950.74420.86770.98510.94270.953
AQI 1.0060.92640.98471.00471.02961.29080.94211.01830.9910.9546
SGI 1.23071.1531.06081.08931.07190.78231.19611.11760.94671.0052
DEPI 0.89990.98541.0140.99390.97661.00330.9391.00511.07051.0022
SGAI 0.83820.93311.01471.02890.9841.6170.87710.95621.0841.0515
LVGI 0.94890.89580.94621.00361.13341.05051.01470.93080.9780.9179
TATA -0.0203-0.0365-0.0374-0.0624-0.1113-0.0447-0.0072-0.0033-0.0489-0.0953
M-score -2.35-2.64-2.57-2.51-3.07-2.37-2.59-2.40-2.73-2.95

Dow Chemical Co Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.92750.95240.93050.90361.03171.06221.05221.09590.98710.9916
GMI 0.930.98511.07321.07691.0170.94270.89420.88420.94310.953
AQI 0.96771.01831.00951.01550.99830.9910.98230.95791.30690.9546
SGI 1.13921.11761.09061.01780.95490.94670.94130.96710.99381.0052
DEPI 1.05271.00511.00650.99361.0311.07051.04551.03591.01811.0022
SGAI 0.910.95620.96821.01171.07671.0841.11221.10641.04371.0515
LVGI 0.9460.93081.06870.99410.9780.8990.95470.72520.9179
TATA 0.0166-0.0033-0.013-0.025-0.0235-0.0489-0.0545-0.0921-0.0757-0.0953
M-score -2.36-2.40-2.50-2.62-2.60-2.73-2.78-2.93-2.67-2.95
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