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Johnson & Johnson (NYSE:JNJ)
Beneish M-Score
-2.53 (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.

Johnson & Johnson has a M-score of -2.53 suggests that the company is not a manipulator.

JNJ' s 10-Year Beneish M-Score Range
Min: -2.75   Max: -2.27
Current: -2.53

-2.75
-2.27

During the past 13 years, the highest Beneish M-Score of Johnson & Johnson was -2.27. The lowest was -2.75. And the median was -2.62.


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 Johnson & Johnson 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 * 0.9764+0.528 * 0.9871+0.404 * 0.9212+0.892 * 1.0608+0.115 * 0.9408
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9861+4.679 * -0.0082-0.327 * 0.9978
=-2.53

* 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 $11,713 Mil.
Revenue was 18355 + 17575 + 17877 + 17505 = $71,312 Mil.
Gross Profit was 12400 + 12231 + 12388 + 11951 = $48,970 Mil.
Total Current Assets was $56,407 Mil.
Total Assets was $132,683 Mil.
Property, Plant and Equipment(Net PPE) was $16,710 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,104 Mil.
Selling, General & Admin. Expense(SGA) was $21,830 Mil.
Total Current Liabilities was $25,675 Mil.
Long-Term Debt was $13,328 Mil.
Net Income was 3519 + 2982 + 3833 + 3497 = $13,831 Mil.
Non Operating Income was -868 + -943 + -172 + -515 = $-2,498 Mil.
Cash Flow from Operations was 4139 + 5947 + 5051 + 2277 = $17,414 Mil.
Accounts Receivable was $11,309 Mil.
Revenue was 17558 + 17052 + 16475 + 16139 = $67,224 Mil.
Gross Profit was 11555 + 11455 + 11332 + 11224 = $45,566 Mil.
Total Current Assets was $46,116 Mil.
Total Assets was $121,347 Mil.
Property, Plant and Equipment(Net PPE) was $16,097 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,666 Mil.
Selling, General & Admin. Expense(SGA) was $20,869 Mil.
Total Current Liabilities was $24,262 Mil.
Long-Term Debt was $11,489 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)
=(11713 / 71312) / (11309 / 67224)
=0.16425006 / 0.16822861
=0.9764

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)
=(12231 / 67224) / (12400 / 71312)
=0.6778234 / 0.6867007
=0.9871

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 - (56407 + 16710) / 132683) / (1 - (46116 + 16097) / 121347)
=0.44893468 / 0.48731324
=0.9212

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
=71312 / 67224
=1.0608

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))
=(3666 / (3666 + 16097)) / (4104 / (4104 + 16710))
=0.18549815 / 0.19717498
=0.9408

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)
=(21830 / 71312) / (20869 / 67224)
=0.30611959 / 0.31043972
=0.9861

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)
=((13328 + 25675) / 132683) / ((11489 + 24262) / 121347)
=0.29395627 / 0.29461791
=0.9978

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
=(13831 - -2498 - 17414) / 132683
=-0.0082

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.

Johnson & Johnson has a M-score of -2.53 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.

Johnson & Johnson Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.91870.96191.17730.94610.98631.02221.01841.02521.03390.9764
GMI 0.99120.991.0071.01150.99981.01091.01021.01161.01340.9871
AQI 0.91340.96361.74060.92930.93651.00120.93520.98361.2420.9212
SGI 1.1311.06691.05561.14571.04340.9710.9951.05591.03371.0608
DEPI 0.94341.04411.13240.87360.99421.04090.94170.95220.95120.9408
SGAI 1.0120.99740.95951.02391.00710.94890.98591.02240.96270.9861
LVGI 0.91010.80471.20571.10761.02640.92720.98991.00530.93580.9978
TATA -0.0543-0.0332-0.0548-0.0483-0.0358-0.0397-0.0371-0.0116-0.024-0.0082
M-score -2.71-2.56-2.27-2.70-2.66-2.63-2.66-2.47-2.40-2.53

Johnson & Johnson Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.99481.02520.96650.97811.03491.03390.99360.97931.00610.9764
GMI 1.00931.01161.0131.00961.01031.01341.01441.01180.99860.9871
AQI 0.93350.98360.94181.27451.25321.2421.26260.91110.94220.9212
SGI 1.03081.05591.04611.02331.02331.03371.05531.07891.06971.0608
DEPI 0.96920.95220.92970.97590.96810.95120.88240.84120.89780.9408
SGAI 1.011.02241.01541.00230.9760.96270.95430.96320.97590.9861
LVGI 1.14691.00530.95710.98840.95760.93580.94710.87940.94290.9978
TATA -0.0152-0.0116-0.0168-0.0211-0.0237-0.024-0.0139-0.0153-0.0144-0.0082
M-score -2.60-2.47-2.56-2.46-2.42-2.40-2.38-2.50-2.49-2.53
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