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GuruFocus has detected 1 Warning Sign with Nike Inc $NKE.
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Nike Inc (NYSE:NKE)
Beneish M-Score
-2.33 (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.

Nike Inc has a M-score of -2.33 suggests that the company is not a manipulator.

NKE' s Beneish M-Score Range Over the Past 10 Years
Min: -3.03   Max: -1.34
Current: -2.33

-3.03
-1.34

During the past 13 years, the highest Beneish M-Score of Nike Inc was -1.34. The lowest was -3.03. And the median was -2.52.


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 Nike 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 * 1.0481+0.528 * 1.0283+0.404 * 1.1903+0.892 * 1.0629+0.115 * 1.0831
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9743+4.679 * -0.0036-0.327 * 1.1277
=-2.33

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

This Year (Feb17) TTM:Last Year (Feb16) TTM:
Accounts Receivable was $3,752 Mil.
Revenue was 8432 + 8180 + 9061 + 8244 = $33,917 Mil.
Gross Profit was 3750 + 3616 + 4123 + 3786 = $15,275 Mil.
Total Current Assets was $16,205 Mil.
Total Assets was $23,152 Mil.
Property, Plant and Equipment(Net PPE) was $3,793 Mil.
Depreciation, Depletion and Amortization(DDA) was $691 Mil.
Selling, General & Admin. Expense(SGA) was $10,664 Mil.
Total Current Liabilities was $5,271 Mil.
Long-Term Debt was $3,472 Mil.
Net Income was 1141 + 842 + 1249 + 846 = $4,078 Mil.
Non Operating Income was 88 + 18 + 62 + 58 = $226 Mil.
Cash Flow from Operations was 1067 + 963 + 721 + 1184 = $3,935 Mil.
Accounts Receivable was $3,368 Mil.
Revenue was 8032 + 7686 + 8414 + 7779 = $31,911 Mil.
Gross Profit was 3689 + 3501 + 3995 + 3593 = $14,778 Mil.
Total Current Assets was $15,256 Mil.
Total Assets was $20,987 Mil.
Property, Plant and Equipment(Net PPE) was $3,329 Mil.
Depreciation, Depletion and Amortization(DDA) was $667 Mil.
Selling, General & Admin. Expense(SGA) was $10,298 Mil.
Total Current Liabilities was $4,980 Mil.
Long-Term Debt was $2,048 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)
=(3752 / 33917) / (3368 / 31911)
=0.11062299 / 0.10554354
=1.0481

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)
=(14778 / 31911) / (15275 / 33917)
=0.4631005 / 0.45036412
=1.0283

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 - (16205 + 3793) / 23152) / (1 - (15256 + 3329) / 20987)
=0.13623013 / 0.1144518
=1.1903

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
=33917 / 31911
=1.0629

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))
=(667 / (667 + 3329)) / (691 / (691 + 3793))
=0.16691692 / 0.15410348
=1.0831

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)
=(10664 / 33917) / (10298 / 31911)
=0.3144146 / 0.32271004
=0.9743

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)
=((3472 + 5271) / 23152) / ((2048 + 4980) / 20987)
=0.37763476 / 0.33487397
=1.1277

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
=(4078 - 226 - 3935) / 23152
=-0.0036

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.

Nike Inc has a M-score of -2.33 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.

Nike Inc Annual Data

May07May08May09May10May11May12May13May14May15May16
DSRI 0.95380.98211.00220.92671.11920.85370.92471.00320.88830.9122
GMI 1.00420.97411.00350.96951.01181.05230.99720.97360.97390.9941
AQI 1.01071.57560.85440.90130.99790.86280.91391.33121.2510.9596
SGI 1.09171.14091.02950.99151.0581.16911.07631.09821.10081.058
DEPI 1.07660.95430.88740.96261.1750.95230.89450.99180.96631.1202
SGAI 1.02871.03771.00331.03750.95040.96441.011.02391.02511.0003
LVGI 0.91121.07960.9270.94261.06840.94141.10921.13591.02481.0035
TATA -0.0363-0.0036-0.0255-0.09060.02030.0286-0.0331-0.0117-0.06780.0245
M-score -2.57-2.21-2.62-3.03-2.21-2.34-2.72-2.37-2.74-2.40

Nike Inc Quarterly Data

Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17
DSRI 0.95190.87870.88830.8510.94410.96910.91221.00780.94621.0481
GMI 0.9730.96750.97390.97910.98210.98940.99411.01071.02041.0283
AQI 1.30861.2931.2511.0330.99720.9510.95961.21681.18231.1903
SGI 1.13211.11731.10081.07721.05311.0551.0581.06411.06951.0629
DEPI 0.97910.95380.96630.96741.01731.08931.12021.09681.02861.0831
SGAI 1.04621.04381.02511.00931.00691.00161.00031.0150.99260.9743
LVGI 1.1081.12111.02480.94341.06821.03161.00351.13621.14431.1277
TATA -0.0286-0.0751-0.0678-0.0525-0.030.01830.02450.0157-0.0005-0.0036
M-score -2.48-2.79-2.74-2.78-2.66-2.40-2.40-2.28-2.43-2.33
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