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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 Company has a M-score of -2.58 suggests that the company is not a manipulator.
During the past 11 years, the highest Beneish M-Score of Mead Johnson Nutrition Company was -2.18. The lowest was -2.74. 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 Company 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 * 0.9518||+||0.528 * 0.9751||+||0.404 * 0.828||+||0.892 * 1.0767||+||0.115 * 1.1472|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0112||+||4.679 * -0.0185||-||0.327 * 0.9046|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $400 Mil.|
Revenue was 1060.7 + 1046.8 + 1055.3 + 1037.9 = $4,201 Mil.
Gross Profit was 668.7 + 681.3 + 670.9 + 647 = $2,668 Mil.
Total Current Assets was $2,118 Mil.
Total Assets was $3,474 Mil.
Property, Plant and Equipment(Net PPE) was $868 Mil.
Depreciation, Depletion and Amortization(DDA) was $83 Mil.
Selling, General & Admin. Expense(SGA) was $1,548 Mil.
Total Current Liabilities was $1,781 Mil.
Long-Term Debt was $1,009 Mil.
Net Income was 153.2 + 161.6 + 162.2 + 172.5 = $650 Mil.
Non Operating Income was -32.9 + -28.9 + -19 + -12.2 = $-93 Mil.
Cash Flow from Operations was 214.6 + 192.2 + 191.9 + 207.9 = $807 Mil.
|Accounts Receivable was $391 Mil.
Revenue was 981.1 + 921.3 + 1012.3 + 986.6 = $3,901 Mil.
Gross Profit was 599.1 + 563.8 + 640 + 613.1 = $2,416 Mil.
Total Current Assets was $2,015 Mil.
Total Assets was $3,258 Mil.
Property, Plant and Equipment(Net PPE) was $690 Mil.
Depreciation, Depletion and Amortization(DDA) was $77 Mil.
Selling, General & Admin. Expense(SGA) was $1,422 Mil.
Total Current Liabilities was $1,370 Mil.
Long-Term Debt was $1,523 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)|
|=||(400.3 / 4200.7)||/||(390.6 / 3901.3)|
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)|
|=||(681.3 / 3901.3)||/||(668.7 / 4200.7)|
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 - (2118.1 + 867.5) / 3474.1)||/||(1 - (2015 + 689.9) / 3258.2)|
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))|
|=||(76.9 / (76.9 + 689.9))||/||(83.1 / (83.1 + 867.5))|
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)|
|=||(1547.9 / 4200.7)||/||(1421.6 / 3901.3)|
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)|
|=||((1009.1 + 1781.3) / 3474.1)||/||((1523.2 + 1369.9) / 3258.2)|
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|
|=||(649.5 - -93||-||806.6)||/||3474.1|
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 Company has a M-score of -2.58 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 Company Annual Data
Mead Johnson Nutrition Company Quarterly Data