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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.
3M Co has a M-score of -2.62 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of 3M Co was -2.28. The lowest was -3.01. And the median was -2.66.
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 * 1.0145||+||0.528 * 0.9942||+||0.404 * 1.035||+||0.892 * 1.0323||+||0.115 * 0.9742|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0134||+||4.679 * -0.0345||-||0.327 * 1.074|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $4,253 Mil.|
Revenue was 7569 + 7916 + 7752 + 7634 = $30,871 Mil.
Gross Profit was 3593 + 3768 + 3739 + 3665 = $14,765 Mil.
Total Current Assets was $12,733 Mil.
Total Assets was $33,550 Mil.
Property, Plant and Equipment(Net PPE) was $8,652 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,371 Mil.
Selling, General & Admin. Expense(SGA) was $6,384 Mil.
Total Current Liabilities was $7,498 Mil.
Long-Term Debt was $4,326 Mil.
Net Income was 1103 + 1230 + 1197 + 1129 = $4,659 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1993 + 1151 + 1679 + 994 = $5,817 Mil.
|Accounts Receivable was $4,061 Mil.
Revenue was 7387 + 7497 + 7534 + 7486 = $29,904 Mil.
Gross Profit was 3396 + 3562 + 3664 + 3597 = $14,219 Mil.
Total Current Assets was $13,630 Mil.
Total Assets was $33,876 Mil.
Property, Plant and Equipment(Net PPE) was $8,378 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,288 Mil.
Selling, General & Admin. Expense(SGA) was $6,102 Mil.
Total Current Liabilities was $6,200 Mil.
Long-Term Debt was $4,916 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)|
|=||(4253 / 30871)||/||(4061 / 29904)|
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)|
|=||(3768 / 29904)||/||(3593 / 30871)|
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 - (12733 + 8652) / 33550)||/||(1 - (13630 + 8378) / 33876)|
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))|
|=||(1288 / (1288 + 8378))||/||(1371 / (1371 + 8652))|
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)|
|=||(6384 / 30871)||/||(6102 / 29904)|
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)|
|=||((4326 + 7498) / 33550)||/||((4916 + 6200) / 33876)|
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|
|=||(4659 - 0||-||5817)||/||33550|
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 -2.62 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
3M Co Annual Data
3M Co Quarterly Data