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Johnson & Johnson (NYSE:JNJ)
Beneish M-Score
-2.79 (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 -2.67 suggests that the company is not a manipulator.

JNJ' s Beneish M-Score Range Over the Past 10 Years
Min: -2.81   Max: -2.27
Current: -2.79

-2.81
-2.27

During the past 13 years, the highest Beneish M-Score of Johnson & Johnson was -2.27. The lowest was -2.81. 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 * 1.0329+0.528 * 1.0014+0.404 * 0.9543+0.892 * 0.9474+0.115 * 1.0512
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0117+4.679 * -0.0281-0.327 * 1.079
=-2.67

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

This Year (Sep15) TTM:Last Year (Sep14) TTM:
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.
Net Income was 3358 + 4516 + 4320 + 2521 = $14,715 Mil.
Non Operating Income was -420 + 931 + 348 + -963 = $-104 Mil.
Cash Flow from Operations was 6125 + 5200 + 2872 + 4365 = $18,562 Mil.
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.



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)
=(11366 / 70517) / (11615 / 74432)
=0.16118099 / 0.15604847
=1.0329

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)
=(12430 / 74432) / (11878 / 70517)
=0.69303525 / 0.69204589
=1.0014

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 - (63494 + 15551) / 133266) / (1 - (59973 + 15804) / 132097)
=0.40686297 / 0.42635336
=0.9543

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
=70517 / 74432
=0.9474

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))
=(4006 / (4006 + 15804)) / (3704 / (3704 + 15551))
=0.2022211 / 0.19236562
=1.0512

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)
=(21134 / 70517) / (22049 / 74432)
=0.29970078 / 0.29623012
=1.0117

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)
=((14073 + 25260) / 133266) / ((13152 + 22982) / 132097)
=0.29514655 / 0.27354141
=1.079

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
=(14715 - -104 - 18562) / 133266
=-0.0281

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 -2.67 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 1.17730.94610.98631.02221.01841.02521.03390.97640.8998
GMI 1.0071.01150.99981.01091.01021.01161.01340.98710.9895
AQI 1.74060.92930.93651.00120.93520.98361.2420.92120.9459
SGI 1.05561.14571.04340.9710.9951.05591.03371.06081.0423
DEPI 1.13240.87360.99421.04090.94170.95220.95120.94081.0135
SGAI 0.95951.02391.00710.94890.98591.02240.96270.98610.9648
LVGI 1.20571.10761.02640.92720.98991.00530.93580.99781.0432
TATA -0.0548-0.0483-0.0358-0.0397-0.0371-0.0116-0.024-0.0082-0.0169
M-score -2.27-2.70-2.66-2.63-2.66-2.47-2.40-2.53-2.65

Johnson & Johnson Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
DSRI 1.00610.97641.00341.00440.91490.89980.93030.99891.0329
GMI 0.99860.98710.97710.98030.98480.98950.99640.99221.0014
AQI 0.94220.92120.9330.94640.9230.94590.95160.96360.9543
SGI 1.06971.06081.04861.05071.05551.04231.02320.97750.9474
DEPI 0.89780.94080.98371.0230.99021.01351.03011.041.0512
SGAI 0.97590.98610.98590.96980.96820.96480.96961.00561.0117
LVGI 0.94290.99781.00021.03660.97581.04321.08121.04941.079
TATA -0.0144-0.0082-0.0145-0.0138-0.0082-0.0169-0.0156-0.02-0.0281
M-score -2.49-2.53-2.54-2.53-2.57-2.65-2.64-2.63-2.67
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