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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.
Novo Nordisk A/S has a M-score of -2.29 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Novo Nordisk A/S was -2.00. The lowest was -3.66. And the median was -2.80.
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 * 1.0355||+||0.528 * 0.9959||+||0.404 * 1.5055||+||0.892 * 1.1044||+||0.115 * 0.98|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0095||+||4.679 * -0.0247||-||0.327 * 1.0453|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $2,769 Mil.|
Revenue was 3960.21171747 + 3752.46981339 + 3752.19375219 + 3491.09014675 = $14,956 Mil.
Gross Profit was 3339.66052199 + 3107.5740944 + 3119.34011934 + 2860.5870021 = $12,427 Mil.
Total Current Assets was $7,676 Mil.
Total Assets was $12,838 Mil.
Property, Plant and Equipment(Net PPE) was $3,994 Mil.
Depreciation, Depletion and Amortization(DDA) was $511 Mil.
Selling, General & Admin. Expense(SGA) was $4,814 Mil.
Total Current Liabilities was $4,421 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1104.763643 + 1173.61873399 + 1181.81818182 + 1045.07337526 = $4,505 Mil.
Non Operating Income was 190.728235079 + 0 + 0 + 0 = $191 Mil.
Cash Flow from Operations was 980.470888848 + 1137.39480424 + 1278.16777817 + 1235.15024458 = $4,631 Mil.
|Accounts Receivable was $2,422 Mil.
Revenue was 3737.20805848 + 3451.90467907 + 3213.07146394 + 3140.10260039 = $13,542 Mil.
Gross Profit was 3175.07577108 + 2845.71229779 + 2647.96170985 + 2538.12135149 = $11,207 Mil.
Total Current Assets was $7,160 Mil.
Total Assets was $11,708 Mil.
Property, Plant and Equipment(Net PPE) was $3,840 Mil.
Depreciation, Depletion and Amortization(DDA) was $480 Mil.
Selling, General & Admin. Expense(SGA) was $4,318 Mil.
Total Current Liabilities was $3,858 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)|
|=||(2769.48348239 / 14955.9654298)||/||(2421.82207167 / 13542.2868019)|
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)|
|=||(3107.5740944 / 13542.2868019)||/||(3339.66052199 / 14955.9654298)|
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 - (7676.21828801 + 3993.79448805) / 12837.5615988)||/||(1 - (7160.45640934 + 3840.07844536) / 11707.7910501)|
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))|
|=||(480.121233732 / (480.121233732 + 3840.07844536))||/||(510.859645921 / (510.859645921 + 3993.79448805))|
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)|
|=||(4814.12166936 / 14955.9654298)||/||(4318.10191978 / 13542.2868019)|
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 + 4421.42726775) / 12837.5615988)||/||((0 + 3857.72865038) / 11707.7910501)|
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|
|=||(4505.27393407 - 190.728235079||-||4631.18371584)||/||12837.5615988|
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 -2.29 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