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Johnson & Johnson (NYSE:JNJ)
Beneish M-Score
-2.49 (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 -2.49 suggests that the company is not a manipulator.

JNJ' s Beneish M-Score Range Over the Past 10 Years
Min: -2.76   Max: -2.27
Current: -2.49

-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 -2.62.


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 * 1.0224+0.528 * 0.9955+0.404 * 1.0673+0.892 * 1.0153+0.115 * 1.022
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9567+4.679 * -0.0077-0.327 * 1.1291
=-2.49

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $11,798 Mil.
Revenue was 17820 + 18482 + 17482 + 17811 = $71,595 Mil.
Gross Profit was 12334 + 13146 + 12153 + 12138 = $49,771 Mil.
Total Current Assets was $63,319 Mil.
Total Assets was $140,369 Mil.
Property, Plant and Equipment(Net PPE) was $16,095 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,732 Mil.
Selling, General & Admin. Expense(SGA) was $20,527 Mil.
Total Current Liabilities was $23,230 Mil.
Long-Term Debt was $23,546 Mil.
Net Income was 4272 + 3997 + 4292 + 3215 = $15,776 Mil.
Non Operating Income was -8 + -671 + -81 + 706 = $-54 Mil.
Cash Flow from Operations was 5361 + 4990 + 1763 + 4795 = $16,909 Mil.
Accounts Receivable was $11,366 Mil.
Revenue was 17102 + 17787 + 17374 + 18254 = $70,517 Mil.
Gross Profit was 11878 + 12430 + 12092 + 12401 = $48,801 Mil.
Total Current Assets was $63,494 Mil.
Total Assets was $133,266 Mil.
Property, Plant and Equipment(Net PPE) was $15,551 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,704 Mil.
Selling, General & Admin. Expense(SGA) was $21,134 Mil.
Total Current Liabilities was $25,260 Mil.
Long-Term Debt was $14,073 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)
=(11798 / 71595) / (11366 / 70517)
=0.16478804 / 0.16118099
=1.0224

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)
=(48801 / 70517) / (49771 / 71595)
=0.69204589 / 0.69517424
=0.9955

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 - (63319 + 16095) / 140369) / (1 - (63494 + 15551) / 133266)
=0.4342483 / 0.40686297
=1.0673

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
=71595 / 70517
=1.0153

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))
=(3704 / (3704 + 15551)) / (3732 / (3732 + 16095))
=0.19236562 / 0.18822817
=1.022

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)
=(20527 / 71595) / (21134 / 70517)
=0.28670997 / 0.29970078
=0.9567

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)
=((23546 + 23230) / 140369) / ((14073 + 25260) / 133266)
=0.33323597 / 0.29514655
=1.1291

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
=(15776 - -54 - 16909) / 140369
=-0.0077

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 -2.49 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 local exchange's currency.

Johnson & Johnson Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 1.17730.94610.98631.02221.01841.02521.03390.97640.89981.0365
GMI 1.0071.01150.99981.01091.01021.01161.01340.98710.98951.0019
AQI 1.74060.92930.93651.00120.93520.98361.2420.92120.99940.9572
SGI 1.05561.14571.04340.9710.9951.05591.03371.06081.04230.9427
DEPI 1.13240.87360.99421.04090.94170.95220.95120.94081.01351.0206
SGAI 0.95951.02391.00710.94890.98591.02240.96270.98610.96481.0245
LVGI 1.20571.10761.02640.92720.98991.00530.93580.99781.04780.9881
TATA -0.0548-0.0483-0.0358-0.0397-0.0371-0.0116-0.024-0.0082-0.017-0.0407
M-score -2.27-2.70-2.66-2.63-2.66-2.47-2.40-2.53-2.63-2.70

Johnson & Johnson Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 1.00440.91490.89980.93030.99891.03291.03651.0371.02211.0224
GMI 0.98030.98480.98950.99640.99221.00141.00191.00110.99950.9955
AQI 0.94640.9230.99940.95160.96360.95430.95720.98670.98011.0673
SGI 1.05071.05551.04231.02320.97750.94740.94270.95370.9861.0153
DEPI 1.0230.99021.01351.03011.041.05121.02061.03911.01161.022
SGAI 0.96980.96820.96480.96961.00561.01171.02451.02070.98190.9567
LVGI 1.03660.97581.04781.08121.04941.0790.98811.03141.12721.1291
TATA -0.0138-0.0082-0.017-0.0156-0.0221-0.0302-0.0407-0.0287-0.0168-0.0077
M-score -2.53-2.57-2.63-2.64-2.64-2.68-2.70-2.64-2.60-2.49
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