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Dow Chemical Co (NYSE:DOW)
Beneish M-Score
-2.92 (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 -2.92 suggests that the company is not a manipulator.

DOW' s 10-Year Beneish M-Score Range
Min: -3.17   Max: -1.95
Current: -2.92

-3.17
-1.95

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.


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 * 0.992+0.528 * 0.9805+0.404 * 0.9582+0.892 * 1.0125+0.115 * 1.0159
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0231+4.679 * -0.0927-0.327 * 0.9358
=-2.92

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

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $10,451 Mil.
Revenue was 14461 + 14386 + 13734 + 14577 = $57,158 Mil.
Gross Profit was 2728 + 2318 + 2018 + 2474 = $9,538 Mil.
Total Current Assets was $25,062 Mil.
Total Assets was $69,233 Mil.
Property, Plant and Equipment(Net PPE) was $17,573 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,685 Mil.
Selling, General & Admin. Expense(SGA) was $3,031 Mil.
Total Current Liabilities was $12,226 Mil.
Long-Term Debt was $16,936 Mil.
Net Income was 1049 + 1048 + 679 + 2425 = $5,201 Mil.
Non Operating Income was 280 + 728 + 381 + 2281 = $3,670 Mil.
Cash Flow from Operations was 575 + 2233 + 1402 + 3741 = $7,951 Mil.
Accounts Receivable was $10,405 Mil.
Revenue was 14383 + 13917 + 13637 + 14513 = $56,450 Mil.
Gross Profit was 2676 + 1978 + 2269 + 2313 = $9,236 Mil.
Total Current Assets was $24,248 Mil.
Total Assets was $69,304 Mil.
Property, Plant and Equipment(Net PPE) was $17,268 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,687 Mil.
Selling, General & Admin. Expense(SGA) was $2,926 Mil.
Total Current Liabilities was $12,440 Mil.
Long-Term Debt was $18,753 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)
=(10451 / 57158) / (10405 / 56450)
=0.18284405 / 0.18432241
=0.992

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)
=(2318 / 56450) / (2728 / 57158)
=0.16361382 / 0.16687078
=0.9805

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 - (25062 + 17573) / 69233) / (1 - (24248 + 17268) / 69304)
=0.38418095 / 0.4009581
=0.9582

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
=57158 / 56450
=1.0125

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))
=(2687 / (2687 + 17268)) / (2685 / (2685 + 17573))
=0.13465297 / 0.13254023
=1.0159

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)
=(3031 / 57158) / (2926 / 56450)
=0.05302845 / 0.05183348
=1.0231

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)
=((16936 + 12226) / 69233) / ((18753 + 12440) / 69304)
=0.42121532 / 0.45008946
=0.9358

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
=(5201 - 3670 - 7951) / 69233
=-0.0927

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 -2.92 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 1.02710.93440.95721.10460.66051.71430.82230.95241.0622
GMI 0.92660.84951.12131.16361.39950.74420.86770.98510.9427
AQI 1.0060.92640.98471.00471.02961.29080.94211.01830.991
SGI 1.23071.1531.06081.08931.07190.78231.19611.11760.9467
DEPI 0.89990.98541.0140.99390.97661.00330.9391.00511.0705
SGAI 0.83820.93311.01471.02890.9841.6170.87710.95621.084
LVGI 0.94890.89580.94621.00361.13341.05051.01470.93080.978
TATA -0.0203-0.0365-0.0374-0.0624-0.1113-0.0447-0.0072-0.0033-0.0489
M-score -2.35-2.64-2.57-2.51-3.07-2.37-2.59-2.40-2.73

Dow Chemical Co Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 0.95240.93050.90361.03171.06221.05221.09590.98710.99160.992
GMI 0.98511.07321.07691.0170.94270.89420.88420.94310.9530.9805
AQI 1.01831.00951.01550.99830.9910.98230.95791.30690.95460.9582
SGI 1.11761.09061.01780.95490.94670.94130.96710.99381.00521.0125
DEPI 1.00511.00650.99361.0311.07051.04551.03591.01811.00221.0159
SGAI 0.95620.96821.01171.07671.0841.11221.10641.04371.05151.0231
LVGI 0.93081.06870.99410.9780.8990.95470.72520.91790.9358
TATA -0.0033-0.013-0.025-0.0235-0.0489-0.0545-0.0921-0.0757-0.0953-0.0927
M-score -2.40-2.50-2.62-2.60-2.73-2.78-2.93-2.67-2.95-2.92
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