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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 -0.58. The lowest was -3.35. And the median was -2.71.
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 * 1.0587||+||0.528 * 0.9981||+||0.404 * 0.7586||+||0.892 * 1.0513||+||0.115 * 1.3725|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9835||+||4.679 * -0.0262||-||0.327 * 0.9913|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $2,380 Mil.|
Revenue was 4147.25872225 + 4062.34138477 + 4213.62906756 + 4032.08572246 = $16,455 Mil.
Gross Profit was 3536.32381815 + 3430.26901144 + 3541.22282212 + 3453.12805695 = $13,961 Mil.
Total Current Assets was $7,948 Mil.
Total Assets was $13,332 Mil.
Property, Plant and Equipment(Net PPE) was $4,097 Mil.
Depreciation, Depletion and Amortization(DDA) was $445 Mil.
Selling, General & Admin. Expense(SGA) was $4,843 Mil.
Total Current Liabilities was $6,272 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1505.51276242 + 1411.48896784 + 1205.0196994 + 1261.60699505 = $5,384 Mil.
Non Operating Income was 0 + 0 + -868.232890705 + 0 = $-868 Mil.
Cash Flow from Operations was 2189.54840659 + 1115.90481593 + 1476.57960018 + 1819.19424504 = $6,601 Mil.
|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 $552 Mil.
Selling, General & Admin. Expense(SGA) was $4,684 Mil.
Total Current Liabilities was $5,807 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)|
|=||(2379.70095152 / 16455.314897)||/||(2137.97773097 / 15651.9246804)|
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)|
|=||(13253.6523359 / 15651.9246804)||/||(13960.9437087 / 16455.314897)|
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 - (7948.34617127 + 4096.81317022) / 13331.6719529)||/||(1 - (7122.63015348 + 3555.82305146) / 12234.8781222)|
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))|
|=||(552.244100924 / (552.244100924 + 3555.82305146))||/||(444.819803334 / (444.819803334 + 4096.81317022))|
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)|
|=||(4843.1725779 / 16455.314897)||/||(4683.84577337 / 15651.9246804)|
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 + 6272.16432563) / 13331.6719529)||/||((0 + 5806.9515498) / 12234.8781222)|
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|
|=||(5383.62842472 - -868.232890705||-||6601.22706773)||/||13331.6719529|
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 -2.55 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