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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 -2.58.
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 * 0.9364||+||0.528 * 1.0362||+||0.404 * 0.9457||+||0.892 * 1.0267||+||0.115 * 0.9409|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9823||+||4.679 * -0.0375||-||0.327 * 0.8862|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $382 Mil.|
Revenue was 1094.4 + 1094.2 + 1090.7 + 1111.1 = $4,390 Mil.
Gross Profit was 700.9 + 664 + 652.8 + 684.3 = $2,702 Mil.
Total Current Assets was $2,539 Mil.
Total Assets was $3,885 Mil.
Property, Plant and Equipment(Net PPE) was $899 Mil.
Depreciation, Depletion and Amortization(DDA) was $94 Mil.
Selling, General & Admin. Expense(SGA) was $1,607 Mil.
Total Current Liabilities was $1,200 Mil.
Long-Term Debt was $1,512 Mil.
Net Income was 207.4 + 158.4 + 187.6 + 171.4 = $725 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 274.5 + 228.8 + 260.6 + 106.4 = $870 Mil.
|Accounts Receivable was $397 Mil.
Revenue was 1113.3 + 1060.7 + 1046.8 + 1055.3 = $4,276 Mil.
Gross Profit was 707.6 + 661.5 + 684.5 + 673.3 = $2,727 Mil.
Total Current Assets was $2,238 Mil.
Total Assets was $3,541 Mil.
Property, Plant and Equipment(Net PPE) was $872 Mil.
Depreciation, Depletion and Amortization(DDA) was $85 Mil.
Selling, General & Admin. Expense(SGA) was $1,593 Mil.
Total Current Liabilities was $1,781 Mil.
Long-Term Debt was $1,009 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)|
|=||(381.9 / 4390.4)||/||(397.2 / 4276.1)|
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)|
|=||(664 / 4276.1)||/||(700.9 / 4390.4)|
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 - (2538.9 + 899.2) / 3884.7)||/||(1 - (2238.4 + 872.3) / 3541.2)|
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 / (85 + 872.3))||/||(93.7 / (93.7 + 899.2))|
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)|
|=||(1606.6 / 4390.4)||/||(1593 / 4276.1)|
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)|
|=||((1511.9 + 1200) / 3884.7)||/||((1008.7 + 1780.9) / 3541.2)|
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|
|=||(724.8 - 0||-||870.3)||/||3884.7|
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 -2.66 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