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GuruFocus has detected 6 Warning Signs with Canon Inc $CAJ.
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Canon Inc (NYSE:CAJ)
Beneish M-Score
-2.72 (As of Today)

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.

Canon Inc has a M-score of -2.75 suggests that the company is not a manipulator.

CAJ' s Beneish M-Score Range Over the Past 10 Years
Min: -3.62   Max: 2163.67
Current: -2.72

-3.62
2163.67

During the past 13 years, the highest Beneish M-Score of Canon Inc was 2163.67. The lowest was -3.62. And the median was -2.74.


Definition

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 Canon Inc 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 * 1.0638+0.528 * 1.0455+0.404 * 0.9898+0.892 * 1.0493+0.115 * 0.9564
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9824+4.679 * -0.0775-0.327 * 1.0808
=-2.75

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $4,902 Mil.
Revenue was 8614.87028025 + 8320.59318213 + 7651.8480748 + 8165.53062195 = $32,753 Mil.
Gross Profit was 4147.70206303 + 3966.50462378 + 3700.0991312 + 4104.07504824 = $15,918 Mil.
Total Current Assets was $18,483 Mil.
Total Assets was $45,289 Mil.
Property, Plant and Equipment(Net PPE) was $10,389 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,318 Mil.
Selling, General & Admin. Expense(SGA) was $10,712 Mil.
Total Current Liabilities was $9,109 Mil.
Long-Term Debt was $5,456 Mil.
Net Income was 487.87378284 + 386.471847384 + 239.535959868 + 507.333112484 = $1,621 Mil.
Non Operating Income was 11.6369175453 + -73.2080956498 + 44.3781604825 + 107.374497987 = $90 Mil.
Cash Flow from Operations was 1482.69739144 + 1352.78077831 + 1003.65184022 + 1201.55594304 = $5,041 Mil.
Accounts Receivable was $4,391 Mil.
Revenue was 7059.39961942 + 8571.85842891 + 7705.37239196 + 7875.98631087 = $31,213 Mil.
Gross Profit was 3583.98926077 + 4298.17075677 + 3905.35474699 + 4072.08778632 = $15,860 Mil.
Total Current Assets was $16,518 Mil.
Total Assets was $42,850 Mil.
Property, Plant and Equipment(Net PPE) was $10,639 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,248 Mil.
Selling, General & Admin. Expense(SGA) was $10,391 Mil.
Total Current Liabilities was $12,744 Mil.
Long-Term Debt was $7 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(4902.13564891 / 32752.8421591) / (4391.36221274 / 31212.6167512)
=0.14967054 / 0.1406919
=1.0638

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(15859.6025508 / 31212.6167512) / (15918.3808663 / 32752.8421591)
=0.50811512 / 0.48601525
=1.0455

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (18482.9675025 + 10389.1990984) / 45289.209283) / (1 - (16518.0635729 + 10639.4395905) / 42850.298012)
=0.36249347 / 0.3662237
=0.9898

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=32752.8421591 / 31212.6167512
=1.0493

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))
=(2248.39679988 / (2248.39679988 + 10639.4395905)) / (2317.86855846 / (2317.86855846 + 10389.1990984))
=0.17445883 / 0.18240782
=0.9564

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)
=(10711.8743464 / 32752.8421591) / (10390.7768931 / 31212.6167512)
=0.32705175 / 0.3329031
=0.9824

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)
=((5455.80141078 + 9109.00532695) / 45289.209283) / ((7.03079826125 + 12743.6317704) / 42850.298012)
=0.32159552 / 0.29756298
=1.0808

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(1621.21470258 - 90.1814803651 - 5040.685953) / 45289.209283
=-0.0775

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.

Canon Inc has a M-score of -2.75 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Canon Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.00820.87781.11810.87010.97071.01430.98330.98891.01971.1257
GMI 0.98921.06231.05980.9260.98461.02880.98430.9640.98251.0341
AQI 1.14161.15541.05461.12350.91261.03831.03141.12111.45091.3804
SGI 1.08241.04860.84831.24261.05550.95480.87860.91530.90480.9975
DEPI 0.8841.05140.96321.06541.01741.01510.95060.98531.0191.004
SGAI 0.9351.0441.07961.03381.01221.00321.04581.03061.03171.021
LVGI 1.07540.85560.85431.10351.00920.93760.93581.03260.89131.6835
TATA -0.07-0.0643-0.1207-0.1204-0.0529-0.0451-0.0688-0.0841-0.0547-0.0748
M-score -2.70-2.71-2.99-2.97-2.75-2.67-2.91-2.95-2.60-2.77

Canon Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.98890.93061.00340.98711.01971.08370.98231.0341.12571.0638
GMI 0.9640.96870.98580.98240.98250.99060.99411.01151.03411.0455
AQI 1.12111.12161.54611.45321.45092.02211.43571.45471.38040.9898
SGI 0.91530.88230.87030.88510.90480.940.98440.99560.99751.0493
DEPI 0.98530.97180.95730.98981.0191.06651.0731.05141.0040.9564
SGAI 1.03061.04921.04691.03731.03171.02481.02871.02531.0210.9824
LVGI 1.03261.03871.00981.00420.89131.46961.47351.51461.68351.0808
TATA -0.0841-0.0802-0.0667-0.0657-0.0547-0.0539-0.061-0.0684-0.0748-0.0775
M-score -2.95-3.02-2.71-2.74-2.60-2.45-2.77-2.75-2.77-2.75
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