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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.
Novo Nordisk A/S has a M-score of -2.21 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Novo Nordisk A/S was -1.98. The lowest was -3.45. And the median was -2.77.
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 Novo Nordisk A/S 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 * 1.0149||+||0.528 * 0.9983||+||0.404 * 1.2253||+||0.892 * 1.0671||+||0.115 * 0.9916|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9728||+||4.679 * 0.0179||-||0.327 * 0.9431|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $2,090 Mil.|
Revenue was 3925.40834846 + 3763.04106548 + 3960.21171747 + 3752.46981339 = $15,401 Mil.
Gross Profit was 3259.16515426 + 3121.90159083 + 3339.66052199 + 3107.5740944 = $12,828 Mil.
Total Current Assets was $6,210 Mil.
Total Assets was $11,557 Mil.
Property, Plant and Equipment(Net PPE) was $4,023 Mil.
Depreciation, Depletion and Amortization(DDA) was $511 Mil.
Selling, General & Admin. Expense(SGA) was $4,784 Mil.
Total Current Liabilities was $4,310 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1269.32849365 + 1194.59859415 + 1104.763643 + 1173.61873399 = $4,742 Mil.
Non Operating Income was 0 + 0 + 190.728235079 + 0 = $191 Mil.
Cash Flow from Operations was 1474.59165154 + 752.682204957 + 980.470888848 + 1137.39480424 = $4,345 Mil.
|Accounts Receivable was $1,930 Mil.
Revenue was 3752.19375219 + 3491.09014675 + 3737.20805848 + 3451.90467907 = $14,432 Mil.
Gross Profit was 3119.34011934 + 2860.5870021 + 3175.07577108 + 2845.71229779 = $12,001 Mil.
Total Current Assets was $6,410 Mil.
Total Assets was $11,283 Mil.
Property, Plant and Equipment(Net PPE) was $3,817 Mil.
Depreciation, Depletion and Amortization(DDA) was $480 Mil.
Selling, General & Admin. Expense(SGA) was $4,609 Mil.
Total Current Liabilities was $4,461 Mil.
Long-Term Debt was $0 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)|
|=||(2089.83666062 / 15401.1309448)||/||(1929.62442962 / 14432.3966365)|
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)|
|=||(3121.90159083 / 14432.3966365)||/||(3259.16515426 / 15401.1309448)|
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 - (6209.61887477 + 4023.23049002) / 11557.3502722)||/||(1 - (6410.14391014 + 3817.3043173) / 11282.7307827)|
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))|
|=||(480.121233732 / (480.121233732 + 3817.3043173))||/||(510.859645921 / (510.859645921 + 4023.23049002))|
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)|
|=||(4784.06745338 / 15401.1309448)||/||(4608.53190338 / 14432.3966365)|
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)|
|=||((0 + 4309.98185118) / 11557.3502722)||/||((0 + 4461.21446121) / 11282.7307827)|
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|
|=||(4742.3094648 - 190.728235079||-||4345.13954959)||/||11557.3502722|
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.
Novo Nordisk A/S has a M-score of -2.21 signals that the company is likely to 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
Novo Nordisk A/S Annual Data
Novo Nordisk A/S Quarterly Data