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GuruFocus has detected 6 Warning Signs with 3M Co $MMM.
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3M Co (NYSE:MMM)
Beneish M-Score
-2.71 (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 -2.71 suggests that the company is not a manipulator.

MMM' s Beneish M-Score Range Over the Past 10 Years
Min: -3.08   Max: -2.34
Current: -2.71

-3.08
-2.34

During the past 13 years, the highest Beneish M-Score of 3M Co was -2.34. The lowest was -3.08. And the median was -2.66.


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 * 1.0631+0.528 * 0.9828+0.404 * 0.9457+0.892 * 0.9945+0.115 * 0.9775
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9939+4.679 * -0.049-0.327 * 1.0637
=-2.71

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $4,392 Mil.
Revenue was 7329 + 7709 + 7662 + 7409 = $30,109 Mil.
Gross Profit was 3613 + 3862 + 3863 + 3731 = $15,069 Mil.
Total Current Assets was $11,726 Mil.
Total Assets was $32,906 Mil.
Property, Plant and Equipment(Net PPE) was $8,516 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,474 Mil.
Selling, General & Admin. Expense(SGA) was $6,111 Mil.
Total Current Liabilities was $6,219 Mil.
Long-Term Debt was $10,723 Mil.
Net Income was 1155 + 1329 + 1291 + 1275 = $5,050 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 2209 + 1908 + 1285 + 1260 = $6,662 Mil.
Accounts Receivable was $4,154 Mil.
Revenue was 7298 + 7712 + 7686 + 7578 = $30,274 Mil.
Gross Profit was 3471 + 3835 + 3828 + 3757 = $14,891 Mil.
Total Current Assets was $10,986 Mil.
Total Assets was $32,883 Mil.
Property, Plant and Equipment(Net PPE) was $8,515 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,435 Mil.
Selling, General & Admin. Expense(SGA) was $6,182 Mil.
Total Current Liabilities was $7,118 Mil.
Long-Term Debt was $8,799 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)
=(4392 / 30109) / (4154 / 30274)
=0.14587001 / 0.13721345
=1.0631

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)
=(14891 / 30274) / (15069 / 30109)
=0.49187422 / 0.50048158
=0.9828

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 - (11726 + 8516) / 32906) / (1 - (10986 + 8515) / 32883)
=0.38485383 / 0.406958
=0.9457

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
=30109 / 30274
=0.9945

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))
=(1435 / (1435 + 8515)) / (1474 / (1474 + 8516))
=0.14422111 / 0.14754755
=0.9775

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)
=(6111 / 30109) / (6182 / 30274)
=0.20296257 / 0.20420163
=0.9939

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)
=((10723 + 6219) / 32906) / ((8799 + 7118) / 32883)
=0.51486051 / 0.48404951
=1.0637

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
=(5050 - 0 - 6662) / 32906
=-0.049

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 -2.71 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 local exchange's currency.

3M Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01560.921.11160.96470.96321.03991.01450.96671.03031.0631
GMI 1.02011.01880.98790.98981.02390.98850.99420.98990.98220.9828
AQI 1.10771.07720.96141.0191.04760.94591.0350.92051.21920.9457
SGI 1.06711.0330.91511.15311.11061.00991.03231.03080.95140.9945
DEPI 1.10280.97651.01121.06370.96041.0420.97420.96150.98640.9775
SGAI 0.92771.01251.02240.96841.0140.97931.01340.98311.00450.9939
LVGI 0.96611.12080.86420.92730.92051.04361.07241.15161.18691.0637
TATA -0.0061-0.0416-0.0641-0.0361-0.0317-0.0253-0.0345-0.0535-0.0483-0.049
M-score -2.34-2.72-2.73-2.51-2.51-2.59-2.62-2.82-2.71-2.71

3M Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.99370.96670.94350.97221.00971.03031.06691.05471.051.0631
GMI 0.98420.98990.98750.98310.97960.98220.98360.98670.9920.9828
AQI 1.00130.92050.88620.85641.12011.21921.27421.30240.97830.9457
SGI 1.0321.03081.01610.98950.96920.95140.95370.96660.97990.9945
DEPI 0.96290.96150.95850.98571.01370.98641.00020.96760.96180.9775
SGAI 0.98550.98310.98020.98590.99771.00451.00111.00431.00150.9939
LVGI 1.20821.15161.06611.18411.221.18691.29651.15581.06661.0637
TATA -0.0475-0.0535-0.0544-0.0424-0.0388-0.0483-0.0513-0.0496-0.0546-0.049
M-score -2.76-2.82-2.85-2.84-2.71-2.71-2.69-2.63-2.75-2.71
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