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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 -2.47 suggests that the company is not a manipulator.
During the past 11 years, the highest Beneish M-Score of Mead Johnson Nutrition Co was -2.10. The lowest was -2.74. And the median was -2.47.
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 * 0.9666||+||0.528 * 0.9809||+||0.404 * 0.7356||+||0.892 * 1.0842||+||0.115 * 1.119|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9947||+||4.679 * 0.0096||-||0.327 * 0.9371|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $452 Mil.|
Revenue was 1111.1 + 1113.3 + 1060.7 + 1046.8 = $4,332 Mil.
Gross Profit was 684.3 + 707.6 + 668.7 + 681.3 = $2,742 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 $1,597 Mil.
Total Current Liabilities was $1,744 Mil.
Long-Term Debt was $1,502 Mil.
Net Income was 171.4 + 202.4 + 153.2 + 161.6 = $689 Mil.
Non Operating Income was 0 + 0 + -32.9 + -28.9 = $-62 Mil.
Cash Flow from Operations was 106.4 + 197.6 + 214.6 + 192.2 = $711 Mil.
|Accounts Receivable was $431 Mil.
Revenue was 1055.3 + 1037.9 + 981.1 + 921.3 = $3,996 Mil.
Gross Profit was 670.9 + 647 + 599.1 + 563.8 = $2,481 Mil.
Total Current Assets was $2,046 Mil.
Total Assets was $3,279 Mil.
Property, Plant and Equipment(Net PPE) was $740 Mil.
Depreciation, Depletion and Amortization(DDA) was $81 Mil.
Selling, General & Admin. Expense(SGA) was $1,481 Mil.
Total Current Liabilities was $1,243 Mil.
Long-Term Debt was $1,519 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)|
|=||(452 / 4331.9)||/||(431.3 / 3995.6)|
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)|
|=||(707.6 / 3995.6)||/||(684.3 / 4331.9)|
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 - (2772.2 + 884.7) / 4112.5)||/||(1 - (2045.5 + 739.5) / 3278.8)|
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))|
|=||(81 / (81 + 739.5))||/||(85.6 / (85.6 + 884.7))|
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)|
|=||(1597.1 / 4331.9)||/||(1480.9 / 3995.6)|
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)|
|=||((1502.1 + 1743.7) / 4112.5)||/||((1518.9 + 1242.6) / 3278.8)|
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|
|=||(688.6 - -61.8||-||710.8)||/||4112.5|
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 -2.47 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