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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 13 years, the highest Beneish M-Score of Mead Johnson Nutrition Co was -2.29. The lowest was -3.15. And the median was -2.62.
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 * 1.0827||+||0.528 * 1.0054||+||0.404 * 0.9311||+||0.892 * 0.9302||+||0.115 * 1.03|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0008||+||4.679 * -0.0321||-||0.327 * 0.9563|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Mar17) TTM:||Last Year (Mar16) TTM:|
|Accounts Receivable was $381 Mil.|
Revenue was 883.5 + 901.6 + 937.5 + 941.5 = $3,664 Mil.
Gross Profit was 553.3 + 575.1 + 603.8 + 608.3 = $2,341 Mil.
Total Current Assets was $2,817 Mil.
Total Assets was $4,227 Mil.
Property, Plant and Equipment(Net PPE) was $964 Mil.
Depreciation, Depletion and Amortization(DDA) was $101 Mil.
Selling, General & Admin. Expense(SGA) was $1,400 Mil.
Total Current Liabilities was $1,309 Mil.
Long-Term Debt was $2,973 Mil.
Net Income was 119.9 + 167.8 + 149.3 + 155.1 = $592 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 196.4 + 180.9 + 234.6 + 116 = $728 Mil.
|Accounts Receivable was $378 Mil.
Revenue was 962.1 + 967 + 977.5 + 1032.4 = $3,939 Mil.
Gross Profit was 614.5 + 608.4 + 630.7 + 676 = $2,530 Mil.
Total Current Assets was $2,634 Mil.
Total Assets was $4,017 Mil.
Property, Plant and Equipment(Net PPE) was $927 Mil.
Depreciation, Depletion and Amortization(DDA) was $100 Mil.
Selling, General & Admin. Expense(SGA) was $1,504 Mil.
Total Current Liabilities was $1,242 Mil.
Long-Term Debt was $3,013 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)|
|=||(381.1 / 3664.1)||/||(378.4 / 3939)|
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)|
|=||(2529.6 / 3939)||/||(2340.5 / 3664.1)|
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 - (2817.3 + 963.6) / 4227.1)||/||(1 - (2634.4 + 927) / 4016.8)|
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))|
|=||(99.9 / (99.9 + 927))||/||(100.5 / (100.5 + 963.6))|
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)|
|=||(1399.9 / 3664.1)||/||(1503.8 / 3939)|
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)|
|=||((2973.3 + 1308.8) / 4227.1)||/||((3012.6 + 1242.3) / 4016.8)|
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|
|=||(592.1 - 0||-||727.9)||/||4227.1|
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 -2.62 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