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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 -2.54.
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 * 0.8787||+||0.528 * 0.9675||+||0.404 * 1.293||+||0.892 * 1.1173||+||0.115 * 0.9037|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0438||+||4.679 * -0.0658||-||0.327 * 1.1211|
|This Year (Feb15) TTM:||Last Year (Feb14) TTM:|
|Accounts Receivable was $3,294 Mil.|
Revenue was 7460 + 7380 + 7982 + 7425 = $30,247 Mil.
Gross Profit was 3426 + 3327 + 3721 + 3385 = $13,859 Mil.
Total Current Assets was $15,207 Mil.
Total Assets was $20,541 Mil.
Property, Plant and Equipment(Net PPE) was $2,862 Mil.
Depreciation, Depletion and Amortization(DDA) was $682 Mil.
Selling, General & Admin. Expense(SGA) was $9,745 Mil.
Total Current Liabilities was $5,586 Mil.
Long-Term Debt was $1,082 Mil.
Net Income was 791 + 655 + 962 + 698 = $3,106 Mil.
Non Operating Income was -5 + -2 + -3 + -189 = $-199 Mil.
Cash Flow from Operations was 2103 + 647 + 588 + 1318 = $4,656 Mil.
|Accounts Receivable was $3,355 Mil.
Revenue was 6972 + 6431 + 6971 + 6697 = $27,071 Mil.
Gross Profit was 3103 + 2826 + 3132 + 2940 = $12,001 Mil.
Total Current Assets was $13,410 Mil.
Total Assets was $17,803 Mil.
Property, Plant and Equipment(Net PPE) was $2,736 Mil.
Depreciation, Depletion and Amortization(DDA) was $576 Mil.
Selling, General & Admin. Expense(SGA) was $8,356 Mil.
Total Current Liabilities was $3,954 Mil.
Long-Term Debt was $1,201 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)|
|=||(3294 / 30247)||/||(3355 / 27071)|
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)|
|=||(3327 / 27071)||/||(3426 / 30247)|
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 - (15207 + 2862) / 20541)||/||(1 - (13410 + 2736) / 17803)|
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))|
|=||(576 / (576 + 2736))||/||(682 / (682 + 2862))|
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)|
|=||(9745 / 30247)||/||(8356 / 27071)|
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)|
|=||((1082 + 5586) / 20541)||/||((1201 + 3954) / 17803)|
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|
|=||(3106 - -199||-||4656)||/||20541|
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