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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 -1.53. The lowest was -3.03. And the median was -2.55.
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 * 0.851||+||0.528 * 0.9791||+||0.404 * 1.033||+||0.892 * 1.0772||+||0.115 * 0.9674|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0093||+||4.679 * -0.0457||-||0.327 * 0.9434|
|This Year (Aug15) TTM:||Last Year (Aug14) TTM:|
|Accounts Receivable was $3,288 Mil.|
Revenue was 8414 + 7779 + 7460 + 7380 = $31,033 Mil.
Gross Profit was 3995 + 3593 + 3426 + 3327 = $14,341 Mil.
Total Current Assets was $15,238 Mil.
Total Assets was $20,766 Mil.
Property, Plant and Equipment(Net PPE) was $3,112 Mil.
Depreciation, Depletion and Amortization(DDA) was $659 Mil.
Selling, General & Admin. Expense(SGA) was $9,989 Mil.
Total Current Liabilities was $5,276 Mil.
Long-Term Debt was $1,079 Mil.
Net Income was 1179 + 865 + 791 + 655 = $3,490 Mil.
Non Operating Income was -31 + -10 + -5 + -2 = $-48 Mil.
Cash Flow from Operations was 491 + 1342 + 2103 + 552 = $4,488 Mil.
|Accounts Receivable was $3,587 Mil.
Revenue was 7982 + 7425 + 6972 + 6431 = $28,810 Mil.
Gross Profit was 3721 + 3385 + 3103 + 2826 = $13,035 Mil.
Total Current Assets was $13,540 Mil.
Total Assets was $18,521 Mil.
Property, Plant and Equipment(Net PPE) was $2,895 Mil.
Depreciation, Depletion and Amortization(DDA) was $589 Mil.
Selling, General & Admin. Expense(SGA) was $9,188 Mil.
Total Current Liabilities was $4,813 Mil.
Long-Term Debt was $1,195 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)|
|=||(3288 / 31033)||/||(3587 / 28810)|
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)|
|=||(3593 / 28810)||/||(3995 / 31033)|
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 - (15238 + 3112) / 20766)||/||(1 - (13540 + 2895) / 18521)|
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))|
|=||(589 / (589 + 2895))||/||(659 / (659 + 3112))|
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)|
|=||(9989 / 31033)||/||(9188 / 28810)|
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)|
|=||((1079 + 5276) / 20766)||/||((1195 + 4813) / 18521)|
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|
|=||(3490 - -48||-||4488)||/||20766|
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 -2.75 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
Nike Inc Annual Data
Nike Inc Quarterly Data