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Johnson & Johnson (NYSE:JNJ)
Beneish M-Score
-2.70 (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 -2.70 suggests that the company is not a manipulator.

JNJ' s Beneish M-Score Range Over the Past 10 Years
Min: -2.75   Max: -2.27
Current: -2.7

-2.75
-2.27

During the past 13 years, the highest Beneish M-Score of Johnson & Johnson was -2.27. The lowest was -2.75. And the median was -2.63.


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 * 1.0365+0.528 * 1.0019+0.404 * 0.9572+0.892 * 0.9427+0.115 * 1.0206
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0245+4.679 * -0.0407-0.327 * 0.9881
=-2.70

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

This Year (Dec15) TTM:Last Year (Dec14) TTM:
Accounts Receivable was $10,734 Mil.
Revenue was 17811 + 17102 + 17787 + 17374 = $70,074 Mil.
Gross Profit was 12138 + 11878 + 12430 + 12092 = $48,538 Mil.
Total Current Assets was $60,210 Mil.
Total Assets was $133,411 Mil.
Property, Plant and Equipment(Net PPE) was $15,905 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,746 Mil.
Selling, General & Admin. Expense(SGA) was $21,203 Mil.
Total Current Liabilities was $27,747 Mil.
Long-Term Debt was $12,857 Mil.
Net Income was 3215 + 3358 + 4516 + 4320 = $15,409 Mil.
Non Operating Income was 696 + -420 + 931 + 348 = $1,555 Mil.
Cash Flow from Operations was 5082 + 6125 + 5200 + 2872 = $19,279 Mil.
Accounts Receivable was $10,985 Mil.
Revenue was 18254 + 18467 + 19495 + 18115 = $74,331 Mil.
Gross Profit was 12401 + 13068 + 13456 + 12660 = $51,585 Mil.
Total Current Assets was $55,744 Mil.
Total Assets was $130,358 Mil.
Property, Plant and Equipment(Net PPE) was $16,126 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,895 Mil.
Selling, General & Admin. Expense(SGA) was $21,954 Mil.
Total Current Liabilities was $25,031 Mil.
Long-Term Debt was $15,122 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)
=(10734 / 70074) / (10985 / 74331)
=0.15318092 / 0.14778491
=1.0365

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)
=(11878 / 74331) / (12138 / 70074)
=0.69399039 / 0.69266775
=1.0019

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 - (60210 + 15905) / 133411) / (1 - (55744 + 16126) / 130358)
=0.42946983 / 0.44867212
=0.9572

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
=70074 / 74331
=0.9427

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))
=(3895 / (3895 + 16126)) / (3746 / (3746 + 15905))
=0.19454573 / 0.19062643
=1.0206

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)
=(21203 / 70074) / (21954 / 74331)
=0.30258013 / 0.29535456
=1.0245

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)
=((12857 + 27747) / 133411) / ((15122 + 25031) / 130358)
=0.30435271 / 0.30802099
=0.9881

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
=(15409 - 1555 - 19279) / 133411
=-0.0407

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 -2.70 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

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 1.17730.94610.98631.02221.01841.02521.03390.97640.89981.0365
GMI 1.00851.01150.99981.01091.01021.01161.01340.98710.98951.0019
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 0.97851.02391.00710.94890.98591.02240.96270.98610.96481.0245
LVGI 1.20571.10761.02640.92720.98991.00530.93580.99781.04780.9881
TATA -0.0548-0.0511-0.0358-0.051-0.0371-0.0116-0.024-0.0082-0.017-0.0407
M-score -2.27-2.72-2.66-2.68-2.66-2.47-2.40-2.53-2.63-2.70

Johnson & Johnson Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
DSRI 0.97641.00341.00440.91490.89980.93030.99891.03291.0365
GMI 0.98710.97710.98030.98480.98950.99640.99221.00141.0019
AQI 0.92120.9330.94640.9230.99940.95160.96360.95430.9572
SGI 1.06081.04861.05071.05551.04231.02320.97750.94740.9427
DEPI 0.94080.98371.0230.99021.01351.03011.041.05121.0206
SGAI 0.98610.98590.96980.96820.96480.96961.00561.01171.0245
LVGI 0.99781.00021.03660.97581.04781.08121.04941.0790.9881
TATA -0.0082-0.0145-0.0138-0.0082-0.017-0.0156-0.02-0.0281-0.0407
M-score -2.53-2.54-2.53-2.57-2.63-2.64-2.63-2.67-2.70
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