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Mead Johnson Nutrition Co (NYSE:MJN)
Beneish M-Score
-2.82 (As of Today)

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 -2.82 suggests that the company is not a manipulator.

MJN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.16   Max: -2.06
Current: -2.82

-3.16
-2.06

During the past 13 years, the highest Beneish M-Score of Mead Johnson Nutrition Co was -2.06. The lowest was -3.16. And the median was -2.64.


Definition

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 * 0.9905+0.528 * 0.9719+0.404 * 0.8745+0.892 * 0.9595+0.115 * 0.9545
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0126+4.679 * -0.0407-0.327 * 1.0841
=-2.82

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Sep15) TTM:Last Year (Sep14) TTM:
Accounts Receivable was $406 Mil.
Revenue was 977.5 + 1032.4 + 1094.4 + 1094.2 = $4,199 Mil.
Gross Profit was 630.7 + 676 + 700.9 + 664 = $2,672 Mil.
Total Current Assets was $2,435 Mil.
Total Assets was $3,778 Mil.
Property, Plant and Equipment(Net PPE) was $933 Mil.
Depreciation, Depletion and Amortization(DDA) was $97 Mil.
Selling, General & Admin. Expense(SGA) was $1,583 Mil.
Total Current Liabilities was $1,194 Mil.
Long-Term Debt was $1,839 Mil.
Net Income was 155.2 + 162.9 + 207.4 + 158.4 = $684 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 152.4 + 182 + 274.5 + 228.8 = $838 Mil.
Accounts Receivable was $427 Mil.
Revenue was 1090.7 + 1111.1 + 1113.3 + 1060.7 = $4,376 Mil.
Gross Profit was 652.8 + 684.3 + 707.6 + 661.5 = $2,706 Mil.
Total Current Assets was $2,337 Mil.
Total Assets was $3,692 Mil.
Property, Plant and Equipment(Net PPE) was $897 Mil.
Depreciation, Depletion and Amortization(DDA) was $89 Mil.
Selling, General & Admin. Expense(SGA) was $1,630 Mil.
Total Current Liabilities was $1,237 Mil.
Long-Term Debt was $1,497 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(406.1 / 4198.5) / (427.3 / 4375.8)
=0.09672502 / 0.09765072
=0.9905

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(676 / 4375.8) / (630.7 / 4198.5)
=0.61844691 / 0.6363225
=0.9719

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (2435.2 + 933.2) / 3777.9) / (1 - (2336.8 + 897.4) / 3691.8)
=0.10839355 / 0.12395038
=0.8745

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=4198.5 / 4375.8
=0.9595

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))
=(88.8 / (88.8 + 897.4)) / (97.2 / (97.2 + 933.2))
=0.09004259 / 0.0943323
=0.9545

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)
=(1583.2 / 4198.5) / (1629.5 / 4375.8)
=0.37708705 / 0.37238905
=1.0126

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)
=((1839.3 + 1193.6) / 3777.9) / ((1496.8 + 1237.1) / 3691.8)
=0.8028005 / 0.74053307
=1.0841

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(683.9 - 0 - 837.7) / 3777.9
=-0.0407

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 -2.82 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Mead Johnson Nutrition Co Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.93030.83331.3480.93640.71520.98750.94830.9571.1393
GMI 1.00891.01020.95461.03331.00731.02440.96611.03550.9561
AQI 0.94671.04390.80281.13860.84971.5610.8280.83930.9149
SGI 1.09861.11880.98061.11151.17041.0611.07671.04970.9233
DEPI 1.03761.00880.98010.99960.90981.15271.14720.95850.9784
SGAI 1.02341.02121.06591.01281.01590.96150.98690.99511.026
LVGI 0.98231.10942.60410.87610.90260.89930.90460.89361.4757
TATA -0.0381-0.0699-0.0695-0.0268-0.0378-0.0345-0.0353-0.0195-0.0615
M-score -2.65-2.87-3.14-2.45-2.81-2.30-2.66-2.58-2.93

Mead Johnson Nutrition Co Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
DSRI 0.99110.94830.92191.06680.99290.9570.92120.86870.99051.1393
GMI 0.98510.96610.9670.97831.01671.03551.03621.01170.97190.9561
AQI 0.83410.8280.7920.73560.8490.83930.94570.990.87450.9149
SGI 1.07561.07671.08181.08421.06181.04971.02670.99530.95950.9233
DEPI 1.15491.14721.11161.1191.05370.95850.94090.92110.95450.9784
SGAI 0.99120.99781.0060.9961.00980.99040.98231.00381.01261.026
LVGI 0.91340.90460.90920.93710.90460.89360.88620.87561.08411.4757
TATA -0.0607-0.0353-0.0277-0.0032-0.0177-0.0195-0.0375-0.058-0.0407-0.0615
M-score -2.73-2.66-2.67-2.44-2.53-2.58-2.67-2.84-2.82-2.93
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