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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 -2.52 suggests that the company is not a manipulator.
During the past 11 years, the highest Beneish M-Score of Mead Johnson Nutrition Co was -2.11. The lowest was -2.76. And the median was -2.52.
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 * 0.9576||+||0.528 * 1.0168||+||0.404 * 0.849||+||0.892 * 1.0618||+||0.115 * 1.0537|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9957||+||4.679 * -0.0086||-||0.327 * 0.9046|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $412 Mil.|
Revenue was 1090.7 + 1111.1 + 1113.3 + 1060.7 = $4,376 Mil.
Gross Profit was 652.8 + 684.3 + 707.6 + 668.7 = $2,713 Mil.
Total Current Assets was $2,337 Mil.
Total Assets was $3,692 Mil.
Property, Plant and Equipment(Net PPE) was $897 Mil.
Depreciation, Depletion and Amortization(DDA) was $89 Mil.
Selling, General & Admin. Expense(SGA) was $1,607 Mil.
Total Current Liabilities was $1,237 Mil.
Long-Term Debt was $1,497 Mil.
Net Income was 187.6 + 171.4 + 202.4 + 153.2 = $715 Mil.
Non Operating Income was 0 + 0 + 0 + -32.9 = $-33 Mil.
Cash Flow from Operations was 260.6 + 106.4 + 197.6 + 214.6 = $779 Mil.
|Accounts Receivable was $405 Mil.
Revenue was 1046.8 + 1055.3 + 1037.9 + 981.1 = $4,121 Mil.
Gross Profit was 681.3 + 670.9 + 647 + 599.1 = $2,598 Mil.
Total Current Assets was $2,081 Mil.
Total Assets was $3,356 Mil.
Property, Plant and Equipment(Net PPE) was $785 Mil.
Depreciation, Depletion and Amortization(DDA) was $82 Mil.
Selling, General & Admin. Expense(SGA) was $1,520 Mil.
Total Current Liabilities was $1,230 Mil.
Long-Term Debt was $1,517 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(412.1 / 4375.8)||/||(405.3 / 4121.1)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(684.3 / 4121.1)||/||(652.8 / 4375.8)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (2336.8 + 897.4) / 3691.8)||/||(1 - (2080.7 + 785.1) / 3355.7)|
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.
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))|
|=||(82.3 / (82.3 + 785.1))||/||(88.8 / (88.8 + 897.4))|
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)|
|=||(1607.3 / 4375.8)||/||(1520.3 / 4121.1)|
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)|
|=||((1496.8 + 1237.1) / 3691.8)||/||((1516.8 + 1230.4) / 3355.7)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(714.6 - -32.9||-||779.2)||/||3691.8|
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 -2.52 suggests that the company will not be a manipulator.
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
Mead Johnson Nutrition Co Annual Data
Mead Johnson Nutrition Co Quarterly Data