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3M Co (NYSE:MMM)
Beneish M-Score
-2.64 (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.

3M Co has a M-score of -2.60 suggests that the company is not a manipulator.

MMM' s 10-Year Beneish M-Score Range
Min: -3.29   Max: -2.28
Current: -2.64

-3.29
-2.28

During the past 13 years, the highest Beneish M-Score of 3M Co was -2.28. The lowest was -3.29. 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 3M 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 * 1.0067+0.528 * 0.9913+0.404 * 1.0399+0.892 * 1.0338+0.115 * 1.2714
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0127+4.679 * -0.0351-0.327 * 1.113
=-2.60

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

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $4,598 Mil.
Revenue was 7831 + 7569 + 7916 + 7752 = $31,068 Mil.
Gross Profit was 3800 + 3593 + 3768 + 3739 = $14,900 Mil.
Total Current Assets was $12,762 Mil.
Total Assets was $33,547 Mil.
Property, Plant and Equipment(Net PPE) was $8,630 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,035 Mil.
Selling, General & Admin. Expense(SGA) was $6,427 Mil.
Total Current Liabilities was $7,450 Mil.
Long-Term Debt was $4,401 Mil.
Net Income was 1207 + 1103 + 1230 + 1197 = $4,737 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1092 + 1993 + 1151 + 1679 = $5,915 Mil.
Accounts Receivable was $4,418 Mil.
Revenue was 7634 + 7387 + 7497 + 7534 = $30,052 Mil.
Gross Profit was 3665 + 3396 + 3562 + 3664 = $14,287 Mil.
Total Current Assets was $13,855 Mil.
Total Assets was $34,029 Mil.
Property, Plant and Equipment(Net PPE) was $8,318 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,311 Mil.
Selling, General & Admin. Expense(SGA) was $6,139 Mil.
Total Current Liabilities was $5,937 Mil.
Long-Term Debt was $4,864 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)
=(4598 / 31068) / (4418 / 30052)
=0.14799794 / 0.14701185
=1.0067

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)
=(3593 / 30052) / (3800 / 31068)
=0.47540929 / 0.47959315
=0.9913

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 - (12762 + 8630) / 33547) / (1 - (13855 + 8318) / 34029)
=0.36232748 / 0.34840871
=1.0399

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
=31068 / 30052
=1.0338

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))
=(1311 / (1311 + 8318)) / (1035 / (1035 + 8630))
=0.13615121 / 0.10708743
=1.2714

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)
=(6427 / 31068) / (6139 / 30052)
=0.2068688 / 0.20427925
=1.0127

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)
=((4401 + 7450) / 33547) / ((4864 + 5937) / 34029)
=0.35326557 / 0.31740574
=1.113

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
=(4737 - 0 - 5915) / 33547
=-0.0351

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.

3M Co has a M-score of -2.60 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.

3M Co Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.80450.9611.00931.08210.89861.06820.98920.96571.01141.0145
GMI 0.98110.9841.03941.02011.01880.98790.98981.02390.98850.9942
AQI 1.24911.2580.79321.10771.07720.96141.0191.04760.94591.035
SGI 1.09761.05781.0831.06711.0330.91511.15311.11061.00991.0323
DEPI 0.98510.99340.97031.10280.97651.01121.06370.96041.0420.9742
SGAI 1.00090.98671.01010.92771.01251.02240.96841.0140.97931.0134
LVGI 0.84750.97091.23320.97361.12080.85510.93730.92051.04361.0724
TATA -0.0659-0.05190.0039-0.0041-0.0416-0.0641-0.0361-0.0317-0.0253-0.0345
M-score -2.74-2.60-2.52-2.28-2.74-2.77-2.49-2.51-2.61-2.62

3M Co Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.95260.95941.02211.01141.01291.01911.00521.01451.00671.0085
GMI 1.01851.00360.99120.98850.98910.99761.00240.99420.99130.9875
AQI 1.011.00521.02590.94590.97780.99991.01141.0351.03991.028
SGI 1.07821.03731.01281.00991.00891.02131.03661.03231.03381.039
DEPI 0.93070.94470.99851.0421.02661.02531.00550.97421.27141.8401
SGAI 1.0090.99920.98670.97930.98310.99281.0051.01341.01270.9999
LVGI 0.92851.02960.95881.04361.02460.96440.98351.07241.1131.1072
TATA -0.0329-0.0295-0.0259-0.0253-0.0299-0.0374-0.0302-0.0345-0.0351-0.0315
M-score -2.58-2.63-2.55-2.61-2.62-2.60-2.57-2.62-2.60-2.52
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