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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 13 years, the highest Beneish M-Score of 3M Co was -2.33. The lowest was -3.29. And the median was -2.65.
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 * 1.05||+||0.528 * 0.992||+||0.404 * 0.9783||+||0.892 * 0.9799||+||0.115 * 0.9618|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0015||+||4.679 * -0.0546||-||0.327 * 1.0666|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $4,743 Mil.|
Revenue was 7709 + 7662 + 7409 + 7298 = $30,078 Mil.
Gross Profit was 3862 + 3863 + 3731 + 3471 = $14,927 Mil.
Total Current Assets was $12,179 Mil.
Total Assets was $34,051 Mil.
Property, Plant and Equipment(Net PPE) was $8,671 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,487 Mil.
Selling, General & Admin. Expense(SGA) was $6,122 Mil.
Total Current Liabilities was $6,400 Mil.
Long-Term Debt was $11,079 Mil.
Net Income was 1329 + 1291 + 1275 + 1038 = $4,933 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1908 + 1285 + 1260 + 2338 = $6,791 Mil.
|Accounts Receivable was $4,610 Mil.
Revenue was 7712 + 7686 + 7578 + 7719 = $30,695 Mil.
Gross Profit was 3835 + 3828 + 3757 + 3692 = $15,112 Mil.
Total Current Assets was $11,608 Mil.
Total Assets was $33,258 Mil.
Property, Plant and Equipment(Net PPE) was $8,470 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,388 Mil.
Selling, General & Admin. Expense(SGA) was $6,238 Mil.
Total Current Liabilities was $7,032 Mil.
Long-Term Debt was $8,974 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)|
|=||(4743 / 30078)||/||(4610 / 30695)|
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)|
|=||(15112 / 30695)||/||(14927 / 30078)|
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 - (12179 + 8671) / 34051)||/||(1 - (11608 + 8470) / 33258)|
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))|
|=||(1388 / (1388 + 8470))||/||(1487 / (1487 + 8671))|
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)|
|=||(6122 / 30078)||/||(6238 / 30695)|
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)|
|=||((11079 + 6400) / 34051)||/||((8974 + 7032) / 33258)|
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|
|=||(4933 - 0||-||6791)||/||34051|
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 -2.75 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