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GuruFocus has detected 2 Warning Signs with Nike Inc $NKE.
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Nike Inc (NYSE:NKE)
Beneish M-Score
-2.43 (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.

Nike Inc has a M-score of -2.43 suggests that the company is not a manipulator.

NKE' s Beneish M-Score Range Over the Past 10 Years
Min: -3.03   Max: -1.85
Current: -2.43

-3.03
-1.85

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 -2.54.


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 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 * 0.9462+0.528 * 1.0204+0.404 * 1.1823+0.892 * 1.0695+0.115 * 1.0286
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9926+4.679 * -0.0005-0.327 * 1.1443
=-2.43

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

This Year (Nov16) TTM:Last Year (Nov15) TTM:
Accounts Receivable was $3,478 Mil.
Revenue was 8180 + 9061 + 8244 + 8032 = $33,517 Mil.
Gross Profit was 3616 + 4123 + 3786 + 3689 = $15,214 Mil.
Total Current Assets was $16,011 Mil.
Total Assets was $22,652 Mil.
Property, Plant and Equipment(Net PPE) was $3,566 Mil.
Depreciation, Depletion and Amortization(DDA) was $698 Mil.
Selling, General & Admin. Expense(SGA) was $10,734 Mil.
Total Current Liabilities was $5,225 Mil.
Long-Term Debt was $3,473 Mil.
Net Income was 842 + 1249 + 846 + 950 = $3,887 Mil.
Non Operating Income was 18 + 62 + 58 + 17 = $155 Mil.
Cash Flow from Operations was 963 + 721 + 1184 + 876 = $3,744 Mil.
Accounts Receivable was $3,437 Mil.
Revenue was 7686 + 8414 + 7779 + 7460 = $31,339 Mil.
Gross Profit was 3501 + 3995 + 3593 + 3426 = $14,515 Mil.
Total Current Assets was $16,755 Mil.
Total Assets was $22,583 Mil.
Property, Plant and Equipment(Net PPE) was $3,235 Mil.
Depreciation, Depletion and Amortization(DDA) was $655 Mil.
Selling, General & Admin. Expense(SGA) was $10,111 Mil.
Total Current Liabilities was $5,511 Mil.
Long-Term Debt was $2,067 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)
=(3478 / 33517) / (3437 / 31339)
=0.10376824 / 0.10967166
=0.9462

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)
=(14515 / 31339) / (15214 / 33517)
=0.46316092 / 0.45391891
=1.0204

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 - (16011 + 3566) / 22652) / (1 - (16755 + 3235) / 22583)
=0.1357496 / 0.11482088
=1.1823

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
=33517 / 31339
=1.0695

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))
=(655 / (655 + 3235)) / (698 / (698 + 3566))
=0.16838046 / 0.16369606
=1.0286

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)
=(10734 / 33517) / (10111 / 31339)
=0.32025539 / 0.32263314
=0.9926

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)
=((3473 + 5225) / 22652) / ((2067 + 5511) / 22583)
=0.38398375 / 0.33556215
=1.1443

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
=(3887 - 155 - 3744) / 22652
=-0.0005

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 -2.43 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.

Nike Inc Annual Data

May07May08May09May10May11May12May13May14May15May16
DSRI 0.95380.98211.00220.92671.11920.86060.91731.00320.88830.9122
GMI 1.00420.97411.00350.96951.01181.05170.99780.97360.97390.9941
AQI 1.01071.57560.85440.90130.99790.86280.91391.33121.2510.9596
SGI 1.09171.14091.02950.99151.0581.15981.0851.09821.10081.058
DEPI 1.07660.95430.88740.96261.1750.95230.89450.99180.96631.1202
SGAI 1.02871.03771.00331.03750.95040.95961.01511.02391.02511.0003
LVGI 0.91121.07960.9270.94261.06840.94141.10921.13591.02481.0035
TATA -0.0363-0.0036-0.0255-0.09060.02030.0285-0.0331-0.0117-0.06780.0245
M-score -2.57-2.21-2.62-3.03-2.21-2.34-2.72-2.37-2.74-2.40

Nike Inc Quarterly Data

Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17
DSRI 0.95190.87870.88830.8510.94410.96910.91221.00780.94621.0481
GMI 0.9730.96750.97390.97910.98210.98940.99411.01071.02041.0283
AQI 1.30861.2931.2511.0330.99720.9510.95961.21681.18231.1903
SGI 1.13211.11731.10081.07721.05311.0551.0581.06411.06951.0629
DEPI 0.97910.95380.96630.96741.01731.08931.12021.09681.02861.3821
SGAI 1.04621.04381.02511.00931.00691.00161.00031.0150.99260.9743
LVGI 1.1081.12111.02480.94341.06821.03161.00351.13621.14431.1277
TATA -0.0286-0.0751-0.0678-0.0525-0.030.01830.02450.0157-0.00050.0425
M-score -2.48-2.79-2.74-2.78-2.66-2.40-2.40-2.28-2.43-2.08
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