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Dow Chemical Co (NYSE:DOW)
Beneish M-Score
-2.81 (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 -2.81 suggests that the company is not a manipulator.

DOW' s 10-Year Beneish M-Score Range
Min: -3.13   Max: -1.08
Current: -2.81

-3.13
-1.08

During the past 13 years, the highest Beneish M-Score of Dow Chemical Co was -1.08. The lowest was -3.13. And the median was -2.61.


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 * 0.9316+0.528 * 0.9032+0.404 * 0.9882+0.892 * 1.019+0.115 * 1.0081
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0079+4.679 * -0.0437-0.327 * 1.0678
=-2.81

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $4,685 Mil.
Revenue was 14384 + 14405 + 14917 + 14461 = $58,167 Mil.
Gross Profit was 2773 + 2629 + 2573 + 2728 = $10,703 Mil.
Total Current Assets was $24,267 Mil.
Total Assets was $68,796 Mil.
Property, Plant and Equipment(Net PPE) was $18,051 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,747 Mil.
Selling, General & Admin. Expense(SGA) was $3,106 Mil.
Total Current Liabilities was $11,593 Mil.
Long-Term Debt was $18,838 Mil.
Net Income was 819 + 937 + 967 + 1049 = $3,772 Mil.
Non Operating Income was -8 + 206 + -202 + 280 = $276 Mil.
Cash Flow from Operations was 2757 + 1775 + 1395 + 575 = $6,502 Mil.
Accounts Receivable was $4,935 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.



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)
=(4685 / 58167) / (4935 / 57080)
=0.08054395 / 0.0864576
=0.9316

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)
=(2629 / 57080) / (2773 / 58167)
=0.16618781 / 0.18400468
=0.9032

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 - (24267 + 18051) / 68796) / (1 - (24977 + 17454) / 69501)
=0.38487703 / 0.3894908
=0.9882

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
=58167 / 57080
=1.019

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))
=(2681 / (2681 + 17454)) / (2747 / (2747 + 18051))
=0.13315123 / 0.13208001
=1.0081

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)
=(3106 / 58167) / (3024 / 57080)
=0.05339797 / 0.05297828
=1.0079

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)
=((18838 + 11593) / 68796) / ((16820 + 11971) / 69501)
=0.44233676 / 0.41425303
=1.0678

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
=(3772 - 276 - 6502) / 68796
=-0.0437

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 -2.81 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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.9350.91761.09390.59363.10770.82230.48481.09380.96760.9316
GMI 0.84951.12131.16361.39950.74420.86770.98510.94270.9530.9032
AQI 0.92640.98471.00471.02961.29080.94211.01830.9910.95460.9882
SGI 1.1531.06081.08931.07190.78231.19611.11760.94671.00521.019
DEPI 0.98541.0140.99390.97661.00330.9391.00511.07051.00221.0081
SGAI 0.93311.01471.02890.9841.6170.87710.95621.0841.05151.0079
LVGI 0.89580.94621.00361.13341.05051.01470.93080.9780.91791.0678
TATA -0.0365-0.0374-0.0624-0.1113-0.0447-0.0072-0.0033-0.0489-0.0953-0.0503
M-score -2.64-2.60-2.52-3.13-1.08-2.59-2.83-2.70-2.98-2.84

Dow Chemical Co Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 1.06541.09381.0621.10650.95310.96760.99590.96841.00020.9316
GMI 1.0170.94270.89420.88420.94310.9530.98050.99210.9170.9032
AQI 0.99830.9910.98230.95791.30690.95460.95820.98170.70380.9882
SGI 0.95490.94670.94130.96710.99381.00521.01251.01741.02751.019
DEPI 1.0311.07051.04551.03591.01811.00221.01591.02480.99351.0081
SGAI 1.07671.0841.11221.10641.04371.05151.02311.01531.03771.0079
LVGI 10.9780.8990.95470.72520.91790.93580.98041.37821.0678
TATA -0.0235-0.0489-0.0545-0.0856-0.0707-0.0887-0.0861-0.0443-0.043-0.0437
M-score -2.57-2.70-2.77-2.89-2.68-2.95-2.88-2.71-2.95-2.81
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