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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 Novo Nordisk A/S was -2.30. The lowest was -2.95. And the median was -2.75.
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 * 1.0286||+||0.528 * 0.9942||+||0.404 * 1.0891||+||0.892 * 1.0482||+||0.115 * 0.8772|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9345||+||4.679 * -0.0628||-||0.327 * 1.2693|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $2,161 Mil.|
Revenue was 4073.66903614 + 3852.17376249 + 3942.50925065 + 3768.61800667 = $15,637 Mil.
Gross Profit was 3411.0453845 + 3258.99890922 + 3273.36359162 + 3126.52834383 = $13,070 Mil.
Total Current Assets was $7,671 Mil.
Total Assets was $12,769 Mil.
Property, Plant and Equipment(Net PPE) was $3,834 Mil.
Depreciation, Depletion and Amortization(DDA) was $569 Mil.
Selling, General & Admin. Expense(SGA) was $4,705 Mil.
Total Current Liabilities was $5,582 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1081.83791486 + 1125.40471285 + 1274.85827819 + 1196.36902557 = $4,678 Mil.
Non Operating Income was -75.8893804577 + 0 + 0 + 0 = $-76 Mil.
Cash Flow from Operations was 1209.75625922 + 2111.77865886 + 1481.01565775 + 753.797702853 = $5,556 Mil.
|Accounts Receivable was $2,004 Mil.
Revenue was 3987.13708196 + 3675.14782297 + 3783.40116793 + 3472.28496959 = $14,918 Mil.
Gross Profit was 3362.36677692 + 3043.54058412 + 3145.28402053 + 2845.17810599 = $12,396 Mil.
Total Current Assets was $7,728 Mil.
Total Assets was $12,925 Mil.
Property, Plant and Equipment(Net PPE) was $4,021 Mil.
Depreciation, Depletion and Amortization(DDA) was $514 Mil.
Selling, General & Admin. Expense(SGA) was $4,803 Mil.
Total Current Liabilities was $4,451 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)|
|=||(2160.858975 / 15636.9700559)||/||(2004.22638736 / 14917.9710425)|
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)|
|=||(3258.99890922 / 14917.9710425)||/||(3411.0453845 / 15636.9700559)|
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 - (7670.62683303 + 3833.57359447) / 12768.9682027)||/||(1 - (7728.40867328 + 4020.94818082) / 12924.8438074)|
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))|
|=||(514.332965821 / (514.332965821 + 4020.94818082))||/||(569.170353432 / (569.170353432 + 3833.57359447))|
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)|
|=||(4705.00066468 / 15636.9700559)||/||(4803.30477843 / 14917.9710425)|
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 + 5582.17759441) / 12768.9682027)||/||((0 + 4451.48842337) / 12924.8438074)|
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|
|=||(4678.46993147 - -75.8893804577||-||5556.34827869)||/||12768.9682027|
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 -2.76 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
Novo Nordisk A/S Annual Data
Novo Nordisk A/S Quarterly Data