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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 -3.01. And the median was -2.70.
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 * 1.2253||+||0.528 * 1.0043||+||0.404 * 0.6431||+||0.892 * 1.0362||+||0.115 * 1.0593|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9697||+||4.679 * -0.1055||-||0.327 * 1.0923|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $2,869 Mil.|
Revenue was 4193.18246271 + 4147.76321735 + 4147.25872225 + 4062.34138477 = $16,551 Mil.
Gross Profit was 3495.8312064 + 3547.37159211 + 3536.32381815 + 3430.26901144 = $14,010 Mil.
Total Current Assets was $8,475 Mil.
Total Assets was $13,831 Mil.
Property, Plant and Equipment(Net PPE) was $4,279 Mil.
Depreciation, Depletion and Amortization(DDA) was $471 Mil.
Selling, General & Admin. Expense(SGA) was $4,784 Mil.
Total Current Liabilities was $6,726 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1233.48080086 + 1476.57779786 + 1505.51276242 + 1411.48896784 = $5,627 Mil.
Non Operating Income was -88.0551301685 + 0 + 0 + 0 = $-88 Mil.
Cash Flow from Operations was 1581.44745051 + 2287.8445549 + 2189.54840659 + 1115.90481593 = $7,175 Mil.
|Accounts Receivable was $2,260 Mil.
Revenue was 4213.62906756 + 4032.08572246 + 4071.47156184 + 3654.61031992 = $15,972 Mil.
Gross Profit was 3541.22282212 + 3453.12805695 + 3490.8215468 + 3092.78649534 = $13,578 Mil.
Total Current Assets was $8,046 Mil.
Total Assets was $13,395 Mil.
Property, Plant and Equipment(Net PPE) was $3,728 Mil.
Depreciation, Depletion and Amortization(DDA) was $437 Mil.
Selling, General & Admin. Expense(SGA) was $4,761 Mil.
Total Current Liabilities was $5,964 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)|
|=||(2869.09420906 / 16550.5457871)||/||(2259.59433825 / 15971.7966718)|
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)|
|=||(13577.9589212 / 15971.7966718)||/||(14009.7956281 / 16550.5457871)|
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 - (8474.56185128 + 4279.25245307) / 13830.6108559)||/||(1 - (8046.11119218 + 3727.56457026) / 13395.4472494)|
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))|
|=||(437.027525405 / (437.027525405 + 3727.56457026))||/||(470.549663481 / (470.549663481 + 4279.25245307))|
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)|
|=||(4783.85669639 / 16550.5457871)||/||(4760.65952726 / 15971.7966718)|
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 + 6726.22086098) / 13830.6108559)||/||((0 + 5964.24923391) / 13395.4472494)|
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|
|=||(5627.06032899 - -88.0551301685||-||7174.74522793)||/||13830.6108559|
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 -2.89 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