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GuruFocus has detected 6 Warning Signs with Kellogg Co $K.
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Kellogg Co (NYSE:K)
Beneish M-Score
-2.81 (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.

Kellogg Co has a M-score of -2.81 suggests that the company is not a manipulator.

K' s Beneish M-Score Range Over the Past 10 Years
Min: -2.9   Max: -1.76
Current: -2.81

-2.9
-1.76

During the past 13 years, the highest Beneish M-Score of Kellogg Co was -1.76. The lowest was -2.90. And the median was -2.60.


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 Kellogg Co 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 * 0.9829+0.528 * 0.9472+0.404 * 1.0343+0.892 * 0.9622+0.115 * 1.0157
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9727+4.679 * -0.0577-0.327 * 1.0237
=-2.81

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $1,098 Mil.
Revenue was 3097 + 3254 + 3268 + 3395 = $13,014 Mil.
Gross Profit was 976 + 1264 + 1270 + 1245 = $4,755 Mil.
Total Current Assets was $2,940 Mil.
Total Assets was $15,111 Mil.
Property, Plant and Equipment(Net PPE) was $3,569 Mil.
Depreciation, Depletion and Amortization(DDA) was $517 Mil.
Selling, General & Admin. Expense(SGA) was $3,360 Mil.
Total Current Liabilities was $4,474 Mil.
Long-Term Debt was $6,698 Mil.
Net Income was -53 + 292 + 280 + 175 = $694 Mil.
Non Operating Income was -69 + 3 + 4 + 0 = $-62 Mil.
Cash Flow from Operations was 607 + 373 + 643 + 5 = $1,628 Mil.
Accounts Receivable was $1,161 Mil.
Revenue was 3142 + 3329 + 3498 + 3556 = $13,525 Mil.
Gross Profit was 962 + 1233 + 1241 + 1245 = $4,681 Mil.
Total Current Assets was $3,236 Mil.
Total Assets was $15,251 Mil.
Property, Plant and Equipment(Net PPE) was $3,621 Mil.
Depreciation, Depletion and Amortization(DDA) was $534 Mil.
Selling, General & Admin. Expense(SGA) was $3,590 Mil.
Total Current Liabilities was $5,739 Mil.
Long-Term Debt was $5,275 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)
=(1098 / 13014) / (1161 / 13525)
=0.08437068 / 0.08584104
=0.9829

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)
=(4681 / 13525) / (4755 / 13014)
=0.34609982 / 0.36537575
=0.9472

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 - (2940 + 3569) / 15111) / (1 - (3236 + 3621) / 15251)
=0.56925419 / 0.55039014
=1.0343

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
=13014 / 13525
=0.9622

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))
=(534 / (534 + 3621)) / (517 / (517 + 3569))
=0.12851986 / 0.12652961
=1.0157

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)
=(3360 / 13014) / (3590 / 13525)
=0.25818349 / 0.26543438
=0.9727

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)
=((6698 + 4474) / 15111) / ((5275 + 5739) / 15251)
=0.73932897 / 0.72218215
=1.0237

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
=(694 - -62 - 1628) / 15111
=-0.0577

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.

Kellogg Co has a M-score of -2.81 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 local exchange's currency.

Kellogg Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.8851.11880.87320.95081.04571.1150.9980.90531.1440.9829
GMI 1.00591.05070.97640.99491.10391.01990.92771.18811.00330.9472
AQI 0.98031.00231.00220.97430.95591.12711.02240.98361.03681.0343
SGI 1.07971.08880.98070.98581.06461.07571.04190.98570.92760.9622
DEPI 1.00670.97611.0021.0161.10160.95450.87361.02970.91611.0157
SGAI 1.00250.9471.01250.98891.05870.96630.80961.25470.95820.9727
LVGI 0.97211.08480.91361.0741.023610.93961.03461.06261.0237
TATA -0.0349-0.0096-0.03650.0235-0.0602-0.0541-0.0003-0.0773-0.0647-0.0577
M-score -2.67-2.33-2.77-2.46-2.63-2.50-2.44-2.90-2.72-2.81

Kellogg Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.08270.90530.95460.9480.97591.1441.07851.12211.11240.9829
GMI 0.89981.18811.26891.28711.24911.00330.95280.90960.90680.9472
AQI 1.01330.98360.99411.00291.03581.03681.04521.02231.00051.0343
SGI 0.98070.98570.9810.97020.9540.92760.92840.92450.93970.9622
DEPI 0.8761.02970.99770.94841.03830.91610.97591.01521.01011.0157
SGAI 0.85511.25471.25161.21551.23430.95820.94980.97980.95850.9727
LVGI 1.0071.03461.04161.05641.04291.06261.07491.08821.04971.0237
TATA 0.0077-0.0773-0.0793-0.0845-0.0735-0.0647-0.0594-0.073-0.0673-0.0577
M-score -2.42-2.90-2.83-2.86-2.79-2.72-2.77-2.84-2.80-2.81
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