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Johnson & Johnson (NYSE:JNJ)
Beneish M-Score
-2.54 (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 -2.54 suggests that the company is not a manipulator.

JNJ' s 10-Year Beneish M-Score Range
Min: -2.76   Max: -2.27
Current: -2.54

-2.76
-2.27

During the past 13 years, the highest Beneish M-Score of Johnson & Johnson was -2.27. The lowest was -2.76. 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 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 * 1.0034+0.528 * 0.9771+0.404 * 0.933+0.892 * 1.0486+0.115 * 0.9837
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9859+4.679 * -0.0145-0.327 * 1.0002
=-2.54

* 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 $12,116 Mil.
Revenue was 18115 + 18355 + 17575 + 17877 = $71,922 Mil.
Gross Profit was 12660 + 12400 + 12231 + 12388 = $49,679 Mil.
Total Current Assets was $57,369 Mil.
Total Assets was $133,330 Mil.
Property, Plant and Equipment(Net PPE) was $15,996 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,081 Mil.
Selling, General & Admin. Expense(SGA) was $21,790 Mil.
Total Current Liabilities was $23,840 Mil.
Long-Term Debt was $13,343 Mil.
Net Income was 4727 + 3519 + 2982 + 3833 = $15,061 Mil.
Non Operating Income was -86 + -868 + -943 + -172 = $-2,069 Mil.
Cash Flow from Operations was 3923 + 4139 + 5947 + 5051 = $19,060 Mil.
Accounts Receivable was $11,515 Mil.
Revenue was 17505 + 17558 + 17052 + 16475 = $68,590 Mil.
Gross Profit was 11951 + 11555 + 11455 + 11332 = $46,293 Mil.
Total Current Assets was $47,228 Mil.
Total Assets was $121,536 Mil.
Property, Plant and Equipment(Net PPE) was $15,721 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,929 Mil.
Selling, General & Admin. Expense(SGA) was $21,077 Mil.
Total Current Liabilities was $22,524 Mil.
Long-Term Debt was $11,363 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)
=(12116 / 71922) / (11515 / 68590)
=0.16846028 / 0.16788162
=1.0034

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)
=(12400 / 68590) / (12660 / 71922)
=0.67492346 / 0.69073441
=0.9771

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 - (57369 + 15996) / 133330) / (1 - (47228 + 15721) / 121536)
=0.44974874 / 0.4820547
=0.933

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
=71922 / 68590
=1.0486

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))
=(3929 / (3929 + 15721)) / (4081 / (4081 + 15996))
=0.19994911 / 0.20326742
=0.9837

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)
=(21790 / 71922) / (21077 / 68590)
=0.3029671 / 0.30728969
=0.9859

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)
=((13343 + 23840) / 133330) / ((11363 + 22524) / 121536)
=0.27887947 / 0.27882274
=1.0002

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
=(15061 - -2069 - 19060) / 133330
=-0.0145

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 -2.54 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

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 1.02520.96650.97811.03491.03390.99360.97931.00610.97641.0034
GMI 1.01161.0131.00961.01031.01341.01441.01180.99860.98710.9771
AQI 0.98360.94181.27451.25321.2421.26260.91110.94220.92120.933
SGI 1.05591.04611.02331.02331.03371.05531.07891.06971.06081.0486
DEPI 0.95220.92970.97590.96810.95120.88240.84120.89780.94080.9837
SGAI 1.02241.01541.00230.9760.96270.95430.96320.97590.98610.9859
LVGI 1.00530.95710.98840.95760.93580.94710.87940.94290.99781.0002
TATA -0.0116-0.0168-0.0211-0.0237-0.024-0.0139-0.0153-0.0144-0.0082-0.0145
M-score -2.47-2.56-2.46-2.42-2.40-2.38-2.50-2.49-2.53-2.54
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