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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 -2.07. The lowest was -3.35. And the median was -2.78.
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 * 1.0005||+||0.528 * 0.9837||+||0.404 * 1.11||+||0.892 * 1.0181||+||0.115 * 0.3215|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9632||+||4.679 * -0.0893||-||0.327 * 1.2727|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $2,138 Mil.|
Revenue was 4071.47156184 + 3654.61031992 + 4073.66903614 + 3852.17376249 = $15,652 Mil.
Gross Profit was 3490.8215468 + 3092.78649534 + 3411.0453845 + 3258.99890922 = $13,254 Mil.
Total Current Assets was $7,123 Mil.
Total Assets was $12,235 Mil.
Property, Plant and Equipment(Net PPE) was $3,556 Mil.
Depreciation, Depletion and Amortization(DDA) was $763 Mil.
Selling, General & Admin. Expense(SGA) was $4,684 Mil.
Total Current Liabilities was $5,807 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1255.34155883 + 1432.25918728 + 1081.83791486 + 1125.40471285 = $4,895 Mil.
Non Operating Income was 0 + 344.57754445 + -75.8893804577 + 0 = $269 Mil.
Cash Flow from Operations was 1801.6852242 + 595.469443397 + 1209.75625922 + 2111.77865886 = $5,719 Mil.
|Accounts Receivable was $2,099 Mil.
Revenue was 3942.50925065 + 3768.61800667 + 3987.13708196 + 3675.14782297 = $15,373 Mil.
Gross Profit was 3273.36359162 + 3126.52834383 + 3362.36677692 + 3043.54058412 = $12,806 Mil.
Total Current Assets was $6,237 Mil.
Total Assets was $11,608 Mil.
Property, Plant and Equipment(Net PPE) was $4,041 Mil.
Depreciation, Depletion and Amortization(DDA) was $243 Mil.
Selling, General & Admin. Expense(SGA) was $4,776 Mil.
Total Current Liabilities was $4,329 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)|
|=||(2137.97773097 / 15651.9246804)||/||(2098.94095988 / 15373.4121622)|
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)|
|=||(3092.78649534 / 15373.4121622)||/||(3490.8215468 / 15651.9246804)|
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 - (7122.63015348 + 3555.82305146) / 12234.8781222)||/||(1 - (6236.67085908 + 4040.7575509) / 11607.6994586)|
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))|
|=||(243.291738164 / (243.291738164 + 4040.7575509))||/||(762.823667656 / (762.823667656 + 3555.82305146))|
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)|
|=||(4683.84577337 / 15651.9246804)||/||(4776.14192334 / 15373.4121622)|
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 + 5806.9515498) / 12234.8781222)||/||((0 + 4328.75813419) / 11607.6994586)|
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|
|=||(4894.84337383 - 268.688163992||-||5718.68958567)||/||12234.8781222|
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 -3.01 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