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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 -2.64.
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 * 1.0547||+||0.528 * 0.9867||+||0.404 * 1.3024||+||0.892 * 0.9666||+||0.115 * 0.9676|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0043||+||4.679 * -0.0496||-||0.327 * 1.1558|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $4,667 Mil.|
Revenue was 7662 + 7409 + 7298 + 7712 = $30,081 Mil.
Gross Profit was 3863 + 3731 + 3471 + 3835 = $14,900 Mil.
Total Current Assets was $11,436 Mil.
Total Assets was $33,235 Mil.
Property, Plant and Equipment(Net PPE) was $8,604 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,474 Mil.
Selling, General & Admin. Expense(SGA) was $6,121 Mil.
Total Current Liabilities was $7,254 Mil.
Long-Term Debt was $9,299 Mil.
Net Income was 1291 + 1275 + 1038 + 1296 = $4,900 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1285 + 1260 + 2338 + 1664 = $6,547 Mil.
|Accounts Receivable was $4,578 Mil.
Revenue was 7686 + 7578 + 7719 + 8137 = $31,120 Mil.
Gross Profit was 3828 + 3757 + 3692 + 3932 = $15,209 Mil.
Total Current Assets was $13,431 Mil.
Total Assets was $31,388 Mil.
Property, Plant and Equipment(Net PPE) was $8,389 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,383 Mil.
Selling, General & Admin. Expense(SGA) was $6,305 Mil.
Total Current Liabilities was $5,095 Mil.
Long-Term Debt was $8,431 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)|
|=||(4667 / 30081)||/||(4578 / 31120)|
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)|
|=||(15209 / 31120)||/||(14900 / 30081)|
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 - (11436 + 8604) / 33235)||/||(1 - (13431 + 8389) / 31388)|
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))|
|=||(1383 / (1383 + 8389))||/||(1474 / (1474 + 8604))|
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)|
|=||(6121 / 30081)||/||(6305 / 31120)|
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)|
|=||((9299 + 7254) / 33235)||/||((8431 + 5095) / 31388)|
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|
|=||(4900 - 0||-||6547)||/||33235|
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 -2.63 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