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Johnson & Johnson (NYSE:JNJ)
Beneish M-Score
-2.63 (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 -2.63 suggests that the company is not a manipulator.

JNJ' s 10-Year Beneish M-Score Range
Min: -2.76   Max: -2.27
Current: -2.63

-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 * 0.9989+0.528 * 0.9922+0.404 * 0.9636+0.892 * 0.9775+0.115 * 1.04
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0056+4.679 * -0.02-0.327 * 1.0494
=-2.63

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

This Year (Jun15) TTM:Last Year (Jun14) TTM:
Accounts Receivable was $11,968 Mil.
Revenue was 17787 + 17374 + 18254 + 18467 = $71,882 Mil.
Gross Profit was 12430 + 12092 + 12401 + 13068 = $49,991 Mil.
Total Current Assets was $61,001 Mil.
Total Assets was $132,036 Mil.
Property, Plant and Equipment(Net PPE) was $15,583 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,714 Mil.
Selling, General & Admin. Expense(SGA) was $21,521 Mil.
Total Current Liabilities was $24,512 Mil.
Long-Term Debt was $14,085 Mil.
Net Income was 4516 + 4320 + 2521 + 4749 = $16,106 Mil.
Non Operating Income was 931 + 348 + -963 + 1345 = $1,661 Mil.
Cash Flow from Operations was 5200 + 2872 + 4365 + 4654 = $17,091 Mil.
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.



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)
=(11968 / 71882) / (12257 / 73540)
=0.16649509 / 0.1666712
=0.9989

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)
=(12092 / 73540) / (12430 / 71882)
=0.69005983 / 0.69545922
=0.9922

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 - (61001 + 15583) / 132036) / (1 - (60119 + 16155) / 135200)
=0.41997637 / 0.4358432
=0.9636

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
=71882 / 73540
=0.9775

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))
=(4043 / (4043 + 16155)) / (3714 / (3714 + 15583))
=0.20016833 / 0.19246515
=1.04

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)
=(21521 / 71882) / (21895 / 73540)
=0.29939345 / 0.29772913
=1.0056

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)
=((14085 + 24512) / 132036) / ((13303 + 24359) / 135200)
=0.29232179 / 0.27856509
=1.0494

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
=(16106 - 1661 - 17091) / 132036
=-0.02

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 -2.63 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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.96191.17730.94610.98631.02221.01841.02521.03390.97640.8998
GMI 0.991.0071.01150.99981.01091.01021.01161.01340.98710.9895
AQI 0.96361.74060.92930.93651.00120.93520.98361.2420.92120.9459
SGI 1.06691.05561.14571.04340.9710.9951.05591.03371.06081.0423
DEPI 1.04411.13240.87360.99421.04090.94170.95220.95120.94081.0135
SGAI 0.99740.95951.02391.00710.94890.98591.02240.96270.98610.9648
LVGI 0.80471.20571.10761.02640.92720.98991.00530.93580.99781.0432
TATA -0.0332-0.0548-0.0483-0.0358-0.0397-0.0371-0.0116-0.024-0.0082-0.0169
M-score -2.56-2.27-2.70-2.66-2.63-2.66-2.47-2.40-2.53-2.65

Johnson & Johnson Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
DSRI 0.99360.97931.00610.97641.00341.00440.91490.89980.93030.9989
GMI 1.01441.01180.99860.98710.97710.98030.98480.98950.99640.9922
AQI 1.26260.91110.94220.92120.9330.94640.9230.94590.95160.9636
SGI 1.05531.07891.06971.06081.04861.05071.05551.04231.02320.9775
DEPI 0.88240.84120.89780.94080.98371.0230.99021.01351.03011.04
SGAI 0.95430.96320.97590.98610.98590.96980.96820.96480.96961.0056
LVGI 0.94710.87940.94290.99781.00021.03660.97581.04321.08121.0494
TATA -0.0139-0.0153-0.0144-0.0082-0.0145-0.0138-0.0082-0.0169-0.0156-0.02
M-score -2.38-2.50-2.49-2.53-2.54-2.53-2.57-2.65-2.64-2.63
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