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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 -2.76.
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 * 1.0711||+||0.528 * 0.9858||+||0.404 * 1.0855||+||0.892 * 1.0181||+||0.115 * 0.9399|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.96||+||4.679 * -0.0518||-||0.327 * 1.0733|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $2,041 Mil.|
Revenue was 4032.08572246 + 4071.47156184 + 3654.61031992 + 4073.66903614 = $15,832 Mil.
Gross Profit was 3453.12805695 + 3490.8215468 + 3092.78649534 + 3411.0453845 = $13,448 Mil.
Total Current Assets was $7,749 Mil.
Total Assets was $12,821 Mil.
Property, Plant and Equipment(Net PPE) was $3,608 Mil.
Depreciation, Depletion and Amortization(DDA) was $443 Mil.
Selling, General & Admin. Expense(SGA) was $4,701 Mil.
Total Current Liabilities was $5,798 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1261.60699505 + 1255.34155883 + 1432.25918728 + 1081.83791486 = $5,031 Mil.
Non Operating Income was 0 + 0 + 344.57754445 + -75.8893804577 = $269 Mil.
Cash Flow from Operations was 1819.19424504 + 1801.6852242 + 595.469443397 + 1209.75625922 = $5,426 Mil.
|Accounts Receivable was $1,872 Mil.
Revenue was 3852.17376249 + 3942.50925065 + 3768.61800667 + 3987.13708196 = $15,550 Mil.
Gross Profit was 3258.99890922 + 3273.36359162 + 3126.52834383 + 3362.36677692 = $13,021 Mil.
Total Current Assets was $7,128 Mil.
Total Assets was $12,342 Mil.
Property, Plant and Equipment(Net PPE) was $3,915 Mil.
Depreciation, Depletion and Amortization(DDA) was $448 Mil.
Selling, General & Admin. Expense(SGA) was $4,810 Mil.
Total Current Liabilities was $5,200 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)|
|=||(2041.47666561 / 15831.8366404)||/||(1872.15402462 / 15550.4381018)|
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)|
|=||(3490.8215468 / 15550.4381018)||/||(3453.12805695 / 15831.8366404)|
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 - (7748.73207218 + 3608.43980917) / 12821.4968321)||/||(1 - (7128.31345118 + 3915.02328722) / 12341.8806378)|
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))|
|=||(448.115395903 / (448.115395903 + 3915.02328722))||/||(442.684337718 / (442.684337718 + 3608.43980917))|
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)|
|=||(4701.23559009 / 15831.8366404)||/||(4810.15297131 / 15550.4381018)|
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 + 5797.55293693) / 12821.4968321)||/||((0 + 5199.54291255) / 12341.8806378)|
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|
|=||(5031.04565603 - 268.688163992||-||5426.10517185)||/||12821.4968321|
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 -2.64 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