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Johnson & Johnson (NYSE:JNJ)
Beneish M-Score
-2.65 (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 -2.65 suggests that the company is not a manipulator.

JNJ' s 10-Year Beneish M-Score Range
Min: -2.75   Max: -2.27
Current: -2.65

-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 -2.65.


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 * 0.8998+0.528 * 0.9895+0.404 * 0.9459+0.892 * 1.0423+0.115 * 1.0135
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9648+4.679 * -0.0169-0.327 * 1.0432
=-2.65

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
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 $59,311 Mil.
Total Assets was $131,119 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 $25,085 Mil.
Long-Term Debt was $15,122 Mil.
Net Income was 2521 + 4749 + 4326 + 4727 = $16,323 Mil.
Non Operating Income was -963 + 1345 + -226 + -86 = $70 Mil.
Cash Flow from Operations was 4365 + 4654 + 5529 + 3923 = $18,471 Mil.
Accounts Receivable was $11,713 Mil.
Revenue was 18355 + 17575 + 17877 + 17505 = $71,312 Mil.
Gross Profit was 12400 + 12231 + 12388 + 11951 = $48,970 Mil.
Total Current Assets was $56,407 Mil.
Total Assets was $132,683 Mil.
Property, Plant and Equipment(Net PPE) was $16,710 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,104 Mil.
Selling, General & Admin. Expense(SGA) was $21,830 Mil.
Total Current Liabilities was $25,675 Mil.
Long-Term Debt was $13,328 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)
=(10985 / 74331) / (11713 / 71312)
=0.14778491 / 0.16425006
=0.8998

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)
=(13068 / 71312) / (12401 / 74331)
=0.6867007 / 0.69399039
=0.9895

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 - (59311 + 16126) / 131119) / (1 - (56407 + 16710) / 132683)
=0.42466767 / 0.44893468
=0.9459

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
=74331 / 71312
=1.0423

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))
=(4104 / (4104 + 16710)) / (3895 / (3895 + 16126))
=0.19717498 / 0.19454573
=1.0135

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)
=(21954 / 74331) / (21830 / 71312)
=0.29535456 / 0.30611959
=0.9648

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)
=((15122 + 25085) / 131119) / ((13328 + 25675) / 132683)
=0.30664511 / 0.29395627
=1.0432

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
=(16323 - 70 - 18471) / 131119
=-0.0169

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 -2.65 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 -0.0332-0.0548-0.0483-0.0358-0.051-0.0371-0.0116-0.024-0.0082-0.0169
M-score -2.56-2.27-2.70-2.66-2.68-2.66-2.47-2.40-2.53-2.65

Johnson & Johnson Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
DSRI 1.03390.99360.97931.00610.97641.00341.00440.91490.8998
GMI 1.01341.01441.01180.99860.98710.97710.98030.98480.9895
AQI 1.2421.26260.91110.94220.92120.9330.94640.9230.9459
SGI 1.03371.05531.07891.06971.06081.04861.05071.05551.0423
DEPI 0.95120.88240.84120.89780.94080.98371.0230.99021.0135
SGAI 0.96270.95430.96320.97590.98610.98590.96980.96820.9648
LVGI 0.93580.94710.87940.94290.99781.00021.03660.97581.0432
TATA -0.024-0.0139-0.0114-0.0144-0.0082-0.0145-0.0138-0.0082-0.0169
M-score -2.40-2.38-2.48-2.49-2.53-2.54-2.53-2.57-2.65
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