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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: -2.81   Max: -2.24
Current: -2.53

-2.81
-2.24

During the past 13 years, the highest Beneish M-Score of Johnson & Johnson was -2.24. The lowest was -2.81. And the median was -2.60.


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 * 1.0044+0.528 * 0.9803+0.404 * 0.9464+0.892 * 1.0507+0.115 * 1.023
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9698+4.679 * -0.0138-0.327 * 1.0366
=-2.53

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $12,257 Mil.
Revenue was 19495 + 18115 + 18355 + 17575 = $73,540 Mil.
Gross Profit was 13456 + 12660 + 12400 + 12231 = $50,747 Mil.
Total Current Assets was $60,119 Mil.
Total Assets was $135,200 Mil.
Property, Plant and Equipment(Net PPE) was $16,155 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,043 Mil.
Selling, General & Admin. Expense(SGA) was $21,895 Mil.
Total Current Liabilities was $24,359 Mil.
Long-Term Debt was $13,303 Mil.
Net Income was 4326 + 4727 + 3519 + 2982 = $15,554 Mil.
Non Operating Income was -226 + -86 + -868 + -943 = $-2,123 Mil.
Cash Flow from Operations was 5529 + 3923 + 4139 + 5947 = $19,538 Mil.
Accounts Receivable was $11,614 Mil.
Revenue was 17877 + 17505 + 17558 + 17052 = $69,992 Mil.
Gross Profit was 12388 + 11951 + 11555 + 11455 = $47,349 Mil.
Total Current Assets was $51,273 Mil.
Total Assets was $124,325 Mil.
Property, Plant and Equipment(Net PPE) was $15,794 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,067 Mil.
Selling, General & Admin. Expense(SGA) was $21,488 Mil.
Total Current Liabilities was $23,767 Mil.
Long-Term Debt was $9,643 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)
=(12257 / 73540) / (11614 / 69992)
=0.1666712 / 0.16593325
=1.0044

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)
=(12660 / 69992) / (13456 / 73540)
=0.6764916 / 0.69005983
=0.9803

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 - (60119 + 16155) / 135200) / (1 - (51273 + 15794) / 124325)
=0.4358432 / 0.46055098
=0.9464

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
=73540 / 69992
=1.0507

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))
=(4067 / (4067 + 15794)) / (4043 / (4043 + 16155))
=0.20477317 / 0.20016833
=1.023

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)
=(21895 / 73540) / (21488 / 69992)
=0.29772913 / 0.30700652
=0.9698

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)
=((13303 + 24359) / 135200) / ((9643 + 23767) / 124325)
=0.27856509 / 0.26873115
=1.0366

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
=(15554 - -2123 - 19538) / 135200
=-0.0138

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 0.98970.991.00851.01150.99981.01091.01021.01161.01340.9871
AQI 0.91340.9331.79760.92930.93651.00120.93520.98361.2420.9212
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 0.99230.99740.97851.02391.00710.94890.98591.02240.96270.9861
LVGI 0.91010.81631.18851.10761.02640.92720.98991.00530.93580.9978
TATA -0.0489-0.029-0.0548-0.0511-0.0358-0.051-0.0371-0.0116-0.024-0.0082
M-score -2.68-2.56-2.24-2.72-2.66-2.68-2.66-2.47-2.40-2.53

Johnson & Johnson Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.96650.97811.03491.03390.99360.97931.00610.97641.00341.0044
GMI 1.0131.00961.01031.01341.01441.01180.99860.98710.97710.9803
AQI 0.94181.27451.25321.2421.26260.91110.94220.92120.9330.9464
SGI 1.04611.02331.02331.03371.05531.07891.06971.06081.04861.0507
DEPI 0.92970.97590.96810.95120.88240.84120.89780.94080.98371.023
SGAI 1.01541.00230.9760.96270.95430.96320.97590.98610.98590.9698
LVGI 0.95710.98840.95760.93580.94710.87940.94290.99781.00021.0366
TATA -0.0168-0.0253-0.0237-0.024-0.0139-0.0114-0.0144-0.0082-0.0145-0.0138
M-score -2.56-2.48-2.42-2.40-2.38-2.48-2.49-2.53-2.54-2.53
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