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GuruFocus has detected 6 Warning Signs with 3M Co $FRA:MMM.
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3M Co (FRA:MMM)
Beneish M-Score
-2.66 (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.

3M Co has a M-score of -2.58 suggests that the company is not a manipulator.

FRA:MMM' s Beneish M-Score Range Over the Past 10 Years
Min: -3.29   Max: -2.07
Current: -2.66

-3.29
-2.07

During the past 13 years, the highest Beneish M-Score of 3M Co was -2.07. The lowest was -3.29. And the median was -2.67.


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 3M Co 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 * 1.0668+0.528 * 0.9901+0.404 * 0.9427+0.892 * 1.0276+0.115 * 1.2801
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0036+4.679 * -0.0384-0.327 * 1.0333
=-2.58

* 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 €4,415 Mil.
Revenue was 7185.60074801 + 6947.57796948 + 6868.92987615 + 6819.15272339 = €27,821 Mil.
Gross Profit was 3568.02244039 + 3424.96919139 + 3441.14764323 + 3438.05624778 = €13,872 Mil.
Total Current Assets was €11,128 Mil.
Total Assets was €31,129 Mil.
Property, Plant and Equipment(Net PPE) was €7,995 Mil.
Depreciation, Depletion and Amortization(DDA) was €1,018 Mil.
Selling, General & Admin. Expense(SGA) was €5,669 Mil.
Total Current Liabilities was €5,605 Mil.
Long-Term Debt was €10,100 Mil.
Net Income was 1237.02664797 + 1094.89051095 + 1184.17535418 + 1148.98540406 = €4,665 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 923.796166433 + 2094.03734951 + 1700.08019246 + 1143.64542542 = €5,862 Mil.
Accounts Receivable was €4,027 Mil.
Revenue was 6653.19683908 + 6699.71541357 + 6871.60295821 + 6848.43624699 = €27,073 Mil.
Gross Profit was 3350.39511494 + 3186.45001377 + 3417.08990466 + 3410.85271318 = €13,365 Mil.
Total Current Assets was €9,765 Mil.
Total Assets was €29,617 Mil.
Property, Plant and Equipment(Net PPE) was €7,735 Mil.
Depreciation, Depletion and Amortization(DDA) was €1,307 Mil.
Selling, General & Admin. Expense(SGA) was €5,497 Mil.
Total Current Liabilities was €6,446 Mil.
Long-Term Debt was €8,016 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)
=(4415.14726508 / 27821.261317) / (4027.47844828 / 27072.9514579)
=0.15869688 / 0.14876392
=1.0668

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)
=(13364.7877466 / 27072.9514579) / (13872.1955228 / 27821.261317)
=0.49365832 / 0.4986185
=0.9901

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 - (11127.6297335 + 7995.32491819) / 31128.5647499) / (1 - (9764.72701149 + 7735.27298851) / 29617.4568966)
=0.38567824 / 0.40913225
=0.9427

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
=27821.261317 / 27072.9514579
=1.0276

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))
=(1306.96626554 / (1306.96626554 + 7735.27298851)) / (1017.65231001 / (1017.65231001 + 7995.32491819))
=0.14454011 / 0.11290967
=1.2801

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)
=(5668.99860378 / 27821.261317) / (5496.97700036 / 27072.9514579)
=0.20376497 / 0.20304314
=1.0036

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)
=((10100.0467508 + 5605.4230949) / 31128.5647499) / ((8016.3433908 + 6445.76149425) / 29617.4568966)
=0.50453562 / 0.48829665
=1.0333

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
=(4665.07791716 - 0 - 5861.55913382) / 31128.5647499
=-0.0384

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.

3M Co has a M-score of -2.58 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.

3M Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01560.921.11160.96470.96321.03991.01450.96671.03031.0631
GMI 1.02011.01880.98790.98981.02390.98850.99420.98990.98220.9828
AQI 1.10771.07720.96141.0191.04760.94591.0350.92051.21920.9457
SGI 0.96851.11260.84831.27061.11651.01260.98891.14521.07691.027
DEPI 1.10280.97651.01121.06370.96041.0420.97420.96150.98640.9775
SGAI 0.92771.01251.02240.96841.0140.97931.01340.98311.00450.9939
LVGI 0.96611.12080.86420.92730.92051.04361.07241.15161.18691.0637
TATA -0.0061-0.0416-0.0641-0.0361-0.0317-0.0253-0.0345-0.0535-0.0483-0.049
M-score -2.43-2.65-2.79-2.40-2.51-2.58-2.66-2.72-2.59-2.68

3M Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.06111.10151.01780.97810.98010.93370.9951.02661.09711.0668
GMI 0.99030.98680.98210.9790.98220.98450.98790.9930.98290.9901
AQI 0.92050.88620.85641.12011.21921.27421.30240.97830.94570.9427
SGI 1.04341.11221.14421.14881.1321.05911.02341.00220.99521.0276
DEPI 1.04121.09441.02460.9860.94450.89130.92030.94281.00371.2801
SGAI 0.98280.98130.98690.99821.0051.00041.00381.0020.9941.0036
LVGI 1.15161.06611.18411.221.18691.29651.15581.06661.06371.0333
TATA -0.0522-0.0458-0.0377-0.036-0.0479-0.0521-0.0508-0.0557-0.048-0.0384
M-score -2.71-2.56-2.63-2.57-2.59-2.74-2.65-2.76-2.67-2.58
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