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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.
During the past 12 years, the highest Beneish M-Score of Mead Johnson Nutrition Co was -2.06. The lowest was -2.84. And the median was -2.61.
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 * 0.9389||+||0.528 * 1.0117||+||0.404 * 0.99||+||0.892 * 0.9953||+||0.115 * 0.9211|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0038||+||4.679 * -0.058||-||0.327 * 0.8756|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $391 Mil.|
Revenue was 1032.4 + 1094.4 + 1094.2 + 1090.7 = $4,312 Mil.
Gross Profit was 676 + 700.9 + 664 + 652.8 = $2,694 Mil.
Total Current Assets was $2,617 Mil.
Total Assets was $3,959 Mil.
Property, Plant and Equipment(Net PPE) was $908 Mil.
Depreciation, Depletion and Amortization(DDA) was $96 Mil.
Selling, General & Admin. Expense(SGA) was $1,610 Mil.
Total Current Liabilities was $1,230 Mil.
Long-Term Debt was $1,506 Mil.
Net Income was 162.9 + 207.4 + 158.4 + 187.6 = $716 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 182 + 274.5 + 228.8 + 260.6 = $946 Mil.
|Accounts Receivable was $418 Mil.
Revenue was 1111.1 + 1113.3 + 1060.7 + 1046.8 = $4,332 Mil.
Gross Profit was 684.3 + 707.6 + 661.5 + 684.5 = $2,738 Mil.
Total Current Assets was $2,772 Mil.
Total Assets was $4,113 Mil.
Property, Plant and Equipment(Net PPE) was $885 Mil.
Depreciation, Depletion and Amortization(DDA) was $86 Mil.
Selling, General & Admin. Expense(SGA) was $1,612 Mil.
Total Current Liabilities was $1,744 Mil.
Long-Term Debt was $1,502 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)|
|=||(390.8 / 4311.7)||/||(418.2 / 4331.9)|
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)|
|=||(700.9 / 4331.9)||/||(676 / 4311.7)|
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 - (2616.7 + 908.2) / 3959.1)||/||(1 - (2772.2 + 884.7) / 4112.5)|
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))|
|=||(85.6 / (85.6 + 884.7))||/||(96.2 / (96.2 + 908.2))|
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)|
|=||(1610.1 / 4311.7)||/||(1611.5 / 4331.9)|
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)|
|=||((1506.2 + 1229.7) / 3959.1)||/||((1502.1 + 1743.7) / 4112.5)|
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|
|=||(716.3 - 0||-||945.9)||/||3959.1|
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 -2.78 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