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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 * 1.0078||+||0.528 * 1.0107||+||0.404 * 1.2168||+||0.892 * 1.0641||+||0.115 * 1.0763|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.015||+||4.679 * 0.0157||-||0.327 * 1.1362|
|This Year (Aug16) TTM:||Last Year (Aug15) TTM:|
|Accounts Receivable was $3,526 Mil.|
Revenue was 9061 + 8244 + 8032 + 7686 = $33,023 Mil.
Gross Profit was 4123 + 3786 + 3689 + 3501 = $15,099 Mil.
Total Current Assets was $14,589 Mil.
Total Assets was $21,156 Mil.
Property, Plant and Equipment(Net PPE) was $3,572 Mil.
Depreciation, Depletion and Amortization(DDA) was $681 Mil.
Selling, General & Admin. Expense(SGA) was $10,789 Mil.
Total Current Liabilities was $5,363 Mil.
Long-Term Debt was $1,993 Mil.
Net Income was 1249 + 846 + 950 + 785 = $3,830 Mil.
Non Operating Income was 62 + 58 + 17 + 34 = $171 Mil.
Cash Flow from Operations was 721 + 1184 + 876 + 545 = $3,326 Mil.
|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 $648 Mil.
Selling, General & Admin. Expense(SGA) was $9,989 Mil.
Total Current Liabilities was $5,276 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)|
|=||(3526 / 33023)||/||(3288 / 31033)|
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)|
|=||(14341 / 31033)||/||(15099 / 33023)|
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 - (14589 + 3572) / 21156)||/||(1 - (15238 + 3112) / 20766)|
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))|
|=||(648 / (648 + 3112))||/||(681 / (681 + 3572))|
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)|
|=||(10789 / 33023)||/||(9989 / 31033)|
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)|
|=||((1993 + 5363) / 21156)||/||((1079 + 5276) / 20766)|
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|
|=||(3830 - 171||-||3326)||/||21156|
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 -2.29 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