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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: -3.13   Max: -2.1
Current: -2.95

-3.13
-2.1

During the past 13 years, the highest Beneish M-Score of Dow Chemical Co was -2.10. 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 * 1.0002+0.528 * 0.917+0.404 * 0.7038+0.892 * 1.0275+0.115 * 0.9935
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0377+4.679 * -0.043-0.327 * 1.3782
=-2.95

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $5,032 Mil.
Revenue was 14405 + 14917 + 14461 + 14386 = $58,169 Mil.
Gross Profit was 2629 + 2573 + 2728 + 2318 = $10,248 Mil.
Total Current Assets was $25,730 Mil.
Total Assets was $69,573 Mil.
Property, Plant and Equipment(Net PPE) was $17,694 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,744 Mil.
Selling, General & Admin. Expense(SGA) was $3,121 Mil.
Total Current Liabilities was $12,087 Mil.
Long-Term Debt was $19,001 Mil.
Net Income was 937 + 967 + 1049 + 1048 = $4,001 Mil.
Non Operating Income was 206 + -202 + 280 + 728 = $1,012 Mil.
Cash Flow from Operations was 1775 + 1395 + 575 + 2233 = $5,978 Mil.
Accounts Receivable was $4,896 Mil.
Revenue was 13734 + 14577 + 14383 + 13917 = $56,611 Mil.
Gross Profit was 2018 + 2474 + 2676 + 1978 = $9,146 Mil.
Total Current Assets was $25,009 Mil.
Total Assets was $90,925 Mil.
Property, Plant and Equipment(Net PPE) was $17,360 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,672 Mil.
Selling, General & Admin. Expense(SGA) was $2,927 Mil.
Total Current Liabilities was $11,993 Mil.
Long-Term Debt was $17,487 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)
=(5032 / 58169) / (4896 / 56611)
=0.08650656 / 0.08648496
=1.0002

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)
=(2573 / 56611) / (2629 / 58169)
=0.16155871 / 0.17617631
=0.917

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 - (25730 + 17694) / 69573) / (1 - (25009 + 17360) / 90925)
=0.37584983 / 0.53402255
=0.7038

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
=58169 / 56611
=1.0275

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 + 17360)) / (2744 / (2744 + 17694))
=0.13338658 / 0.13425971
=0.9935

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)
=(3121 / 58169) / (2927 / 56611)
=0.05365401 / 0.05170373
=1.0377

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)
=((19001 + 12087) / 69573) / ((17487 + 11993) / 90925)
=0.44684001 / 0.32422326
=1.3782

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
=(4001 - 1012 - 5978) / 69573
=-0.043

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 1.08060.9350.91761.09390.5921.91671.33690.48481.09380.9676
GMI 0.92660.84951.12131.16361.39120.74860.86770.98510.94270.953
AQI 1.0060.92640.98471.00471.02961.28790.94431.01830.9910.9546
SGI 1.23071.1531.06081.08931.07480.78021.19611.11760.94671.0052
DEPI 0.89990.98541.0140.99390.97661.00330.9391.00511.07051.0022
SGAI 0.83820.93311.01471.02890.98281.61880.87710.95621.0841.0515
LVGI 0.94890.89580.94621.00361.13341.05191.01340.93080.9780.9179
TATA -0.0203-0.0365-0.0374-0.0624-0.1113-0.0447-0.0443-0.0295-0.0343-0.0953
M-score -2.30-2.64-2.60-2.52-3.13-2.18-2.29-2.96-2.63-2.98

Dow Chemical Co Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.92111.06541.09381.0621.10650.95310.96760.99590.96841.0002
GMI 1.07691.0170.94270.89420.88420.94310.9530.98050.99210.917
AQI 1.01550.99830.9910.98230.95791.30690.95460.95820.98170.7038
SGI 1.01780.95490.94670.94130.96710.99381.00521.01251.01741.0275
DEPI 0.99361.0311.07051.04551.03591.01811.00221.01591.02480.9935
SGAI 1.01171.07671.0841.11221.10641.04371.05151.02311.01531.0377
LVGI 0.99410.9780.8990.95470.72520.91790.93580.98041.3782
TATA -0.0513-0.0497-0.0343-0.0398-0.0776-0.0645-0.0953-0.0927-0.0443-0.043
M-score -2.73-2.69-2.63-2.71-2.85-2.65-2.98-2.91-2.71-2.95
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