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Mead Johnson Nutrition Co (NYSE:MJN)
Beneish M-Score
-2.85 (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.

Mead Johnson Nutrition Co has a M-score of -2.85 suggests that the company is not a manipulator.

MJN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.14   Max: -2.06
Current: -2.85

-3.14
-2.06

During the past 13 years, the highest Beneish M-Score of Mead Johnson Nutrition Co was -2.06. The lowest was -3.14. And the median was -2.67.


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 Mead Johnson Nutrition 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 * 1.1576+0.528 * 0.9951+0.404 * 1.0084+0.892 * 0.907+0.115 * 0.9704
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.993+4.679 * -0.0731-0.327 * 1.2649
=-2.85

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

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $426 Mil.
Revenue was 937.5 + 941.5 + 962.1 + 967 = $3,808 Mil.
Gross Profit was 603.8 + 608.3 + 614.5 + 608.4 = $2,435 Mil.
Total Current Assets was $2,806 Mil.
Total Assets was $4,194 Mil.
Property, Plant and Equipment(Net PPE) was $930 Mil.
Depreciation, Depletion and Amortization(DDA) was $100 Mil.
Selling, General & Admin. Expense(SGA) was $1,425 Mil.
Total Current Liabilities was $1,250 Mil.
Long-Term Debt was $3,008 Mil.
Net Income was 149.3 + 155.1 + 72.7 + 128 = $505 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 234.6 + 116 + 160.1 + 301 = $812 Mil.
Accounts Receivable was $406 Mil.
Revenue was 977.5 + 1032.4 + 1094.4 + 1094.2 = $4,199 Mil.
Gross Profit was 630.7 + 676 + 700.9 + 664 = $2,672 Mil.
Total Current Assets was $2,435 Mil.
Total Assets was $3,778 Mil.
Property, Plant and Equipment(Net PPE) was $933 Mil.
Depreciation, Depletion and Amortization(DDA) was $97 Mil.
Selling, General & Admin. Expense(SGA) was $1,582 Mil.
Total Current Liabilities was $1,194 Mil.
Long-Term Debt was $1,839 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)
=(426.4 / 3808.1) / (406.1 / 4198.5)
=0.11197185 / 0.09672502
=1.1576

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)
=(2671.6 / 4198.5) / (2435 / 3808.1)
=0.6363225 / 0.63942649
=0.9951

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 - (2805.7 + 929.6) / 4193.7) / (1 - (2435.2 + 933.2) / 3777.9)
=0.10930682 / 0.10839355
=1.0084

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
=3808.1 / 4198.5
=0.907

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))
=(97.2 / (97.2 + 933.2)) / (100.1 / (100.1 + 929.6))
=0.0943323 / 0.09721278
=0.9704

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)
=(1425.2 / 3808.1) / (1582.4 / 4198.5)
=0.37425488 / 0.37689651
=0.993

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)
=((3008.4 + 1250) / 4193.7) / ((1839.3 + 1193.6) / 3777.9)
=1.0154279 / 0.8028005
=1.2649

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
=(505.1 - 0 - 811.7) / 4193.7
=-0.0731

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.

Mead Johnson Nutrition Co has a M-score of -2.85 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.

Mead Johnson Nutrition Co Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.93030.83331.3480.93640.71520.98750.94830.9571.1649
GMI 1.00891.01020.95461.03331.00731.02440.96611.03550.9561
AQI 0.94671.04390.80281.13860.84971.5610.8280.98220.7818
SGI 1.09861.11880.98061.11151.17041.0611.07671.04970.9233
DEPI 1.03761.00880.98010.99960.90981.15271.14720.95850.9784
SGAI 1.02341.02121.06591.01281.01590.96151.00820.97411.026
LVGI 0.98231.10942.60410.87610.90260.89930.90460.89251.4774
TATA -0.0381-0.0699-0.0695-0.0268-0.0378-0.0345-0.0353-0.0196-0.0641
M-score -2.65-2.87-3.14-2.45-2.81-2.30-2.66-2.52-2.97

Mead Johnson Nutrition Co Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 1.06680.99290.9570.92120.86870.99051.16491.0641.0681.1576
GMI 0.97831.01671.03551.03621.01170.97190.95610.95830.97650.9951
AQI 0.73560.8490.98220.94570.990.87450.78180.98621.09391.0084
SGI 1.08421.06181.04971.02670.99530.95950.92330.89720.89250.907
DEPI 1.1191.05370.95850.94090.92110.95450.97840.97010.98570.9704
SGAI 1.01671.03050.96960.96210.9830.99181.01771.03591.00640.993
LVGI 0.93710.90460.89250.88620.87561.08411.47741.51741.50231.2649
TATA -0.0032-0.0177-0.0196-0.0375-0.058-0.0407-0.0641-0.0689-0.0542-0.0731
M-score -2.45-2.53-2.52-2.67-2.84-2.81-2.97-3.04-2.91-2.85
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