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Johnson & Johnson (NYSE:JNJ)
Beneish M-Score
-2.57 (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 -2.57 suggests that the company is not a manipulator.

JNJ' s 10-Year Beneish M-Score Range
Min: -2.76   Max: -2.27
Current: -2.57

-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 * 0.9149+0.528 * 0.9848+0.404 * 0.923+0.892 * 1.0555+0.115 * 0.9902
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9682+4.679 * -0.0082-0.327 * 0.9758
=-2.57

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $11,615 Mil.
Revenue was 18467 + 19495 + 18115 + 18355 = $74,432 Mil.
Gross Profit was 13068 + 13456 + 12660 + 12400 = $51,584 Mil.
Total Current Assets was $59,973 Mil.
Total Assets was $132,097 Mil.
Property, Plant and Equipment(Net PPE) was $15,804 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,006 Mil.
Selling, General & Admin. Expense(SGA) was $22,049 Mil.
Total Current Liabilities was $22,982 Mil.
Long-Term Debt was $13,152 Mil.
Net Income was 4749 + 4326 + 4727 + 3519 = $17,321 Mil.
Non Operating Income was 1345 + -226 + -86 + -868 = $165 Mil.
Cash Flow from Operations was 4654 + 5529 + 3923 + 4139 = $18,245 Mil.
Accounts Receivable was $12,027 Mil.
Revenue was 17575 + 17877 + 17505 + 17558 = $70,515 Mil.
Gross Profit was 12231 + 12388 + 11951 + 11555 = $48,125 Mil.
Total Current Assets was $52,176 Mil.
Total Assets was $126,933 Mil.
Property, Plant and Equipment(Net PPE) was $16,127 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,038 Mil.
Selling, General & Admin. Expense(SGA) was $21,574 Mil.
Total Current Liabilities was $25,835 Mil.
Long-Term Debt was $9,748 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)
=(11615 / 74432) / (12027 / 70515)
=0.15604847 / 0.17055946
=0.9149

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)
=(13456 / 70515) / (13068 / 74432)
=0.68247891 / 0.69303525
=0.9848

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 - (59973 + 15804) / 132097) / (1 - (52176 + 16127) / 126933)
=0.42635336 / 0.46189722
=0.923

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
=74432 / 70515
=1.0555

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))
=(4038 / (4038 + 16127)) / (4006 / (4006 + 15804))
=0.20024795 / 0.2022211
=0.9902

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)
=(22049 / 74432) / (21574 / 70515)
=0.29623012 / 0.30594909
=0.9682

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)
=((13152 + 22982) / 132097) / ((9748 + 25835) / 126933)
=0.27354141 / 0.28032899
=0.9758

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
=(17321 - 165 - 18245) / 132097
=-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 -2.57 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

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.97811.03491.03390.99360.97931.00610.97641.00341.00440.9149
GMI 1.00961.01031.01341.01441.01180.99860.98710.97710.98030.9848
AQI 1.27451.25321.2421.26260.91110.94220.92120.9330.94640.923
SGI 1.02331.02331.03371.05531.07891.06971.06081.04861.05071.0555
DEPI 0.97590.96810.95120.88240.84120.89780.94080.98371.0230.9902
SGAI 1.00230.9760.96270.95430.96320.97590.98610.98590.96980.9682
LVGI 0.98840.95760.93580.94710.87940.94290.99781.00021.03660.9758
TATA -0.0211-0.0237-0.024-0.0139-0.0153-0.0144-0.0082-0.0145-0.0138-0.0082
M-score -2.46-2.42-2.40-2.38-2.50-2.49-2.53-2.54-2.53-2.57
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