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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 Nike Inc was -1.85. The lowest was -3.03. And the median was -2.58.
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 Nike Inc 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 * 0.9122||+||0.528 * 0.9941||+||0.404 * 0.9596||+||0.892 * 1.058||+||0.115 * 1.1202|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0003||+||4.679 * 0.0245||-||0.327 * 1.0035|
|This Year (May16) TTM:||Last Year (May15) TTM:|
|Accounts Receivable was $3,241 Mil.|
Revenue was 8244 + 8032 + 7686 + 8414 = $32,376 Mil.
Gross Profit was 3786 + 3689 + 3501 + 3995 = $14,971 Mil.
Total Current Assets was $15,025 Mil.
Total Assets was $21,396 Mil.
Property, Plant and Equipment(Net PPE) was $3,520 Mil.
Depreciation, Depletion and Amortization(DDA) was $662 Mil.
Selling, General & Admin. Expense(SGA) was $10,469 Mil.
Total Current Liabilities was $5,358 Mil.
Long-Term Debt was $2,010 Mil.
Net Income was 846 + 950 + 785 + 1179 = $3,760 Mil.
Non Operating Income was 58 + 17 + 34 + 31 = $140 Mil.
Cash Flow from Operations was 1184 + 876 + 545 + 491 = $3,096 Mil.
|Accounts Receivable was $3,358 Mil.
Revenue was 7779 + 7460 + 7380 + 7982 = $30,601 Mil.
Gross Profit was 3593 + 3426 + 3327 + 3721 = $14,067 Mil.
Total Current Assets was $15,587 Mil.
Total Assets was $21,597 Mil.
Property, Plant and Equipment(Net PPE) was $3,011 Mil.
Depreciation, Depletion and Amortization(DDA) was $649 Mil.
Selling, General & Admin. Expense(SGA) was $9,892 Mil.
Total Current Liabilities was $6,332 Mil.
Long-Term Debt was $1,079 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)|
|=||(3241 / 32376)||/||(3358 / 30601)|
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)|
|=||(14067 / 30601)||/||(14971 / 32376)|
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 - (15025 + 3520) / 21396)||/||(1 - (15587 + 3011) / 21597)|
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))|
|=||(649 / (649 + 3011))||/||(662 / (662 + 3520))|
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)|
|=||(10469 / 32376)||/||(9892 / 30601)|
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)|
|=||((2010 + 5358) / 21396)||/||((1079 + 6332) / 21597)|
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|
|=||(3760 - 140||-||3096)||/||21396|
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.
Nike Inc has a M-score of -2.40 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
Nike Inc Annual Data
Nike Inc Quarterly Data