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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 -2.95 suggests that the company is not a manipulator.
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.
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|
* 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
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)|
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)|
|=||(2018 / 56786)||/||(2318 / 57080)|
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 - (24977 + 17454) / 69501)||/||(1 - (23684 + 17520) / 69605)|
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))|
|=||(2698 / (2698 + 17520))||/||(2681 / (2681 + 17454))|
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)|
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)|
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|
|=||(4787 - 3588||-||7823)||/||69501|
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.
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