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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 MeadWestvaco Corp was -1.43. The lowest was -3.01. And the median was -2.64.
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 MeadWestvaco Corp 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 * 0.931||+||0.528 * 0.8603||+||0.404 * 1.0472||+||0.892 * 1.0449||+||0.115 * 0.9901|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9105||+||4.679 * -0.0121||-||0.327 * 1.0348|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $608 Mil.|
Revenue was 1374 + 1468 + 1467 + 1322 = $5,631 Mil.
Gross Profit was 268 + 333 + 318 + 247 = $1,166 Mil.
Total Current Assets was $1,974 Mil.
Total Assets was $9,364 Mil.
Property, Plant and Equipment(Net PPE) was $3,422 Mil.
Depreciation, Depletion and Amortization(DDA) was $370 Mil.
Selling, General & Admin. Expense(SGA) was $607 Mil.
Total Current Liabilities was $1,029 Mil.
Long-Term Debt was $1,790 Mil.
Net Income was 53 + 106 + 73 + 31 = $263 Mil.
Non Operating Income was 9 + -2 + -13 + 0 = $-6 Mil.
Cash Flow from Operations was 298 + 141 + 151 + -208 = $382 Mil.
|Accounts Receivable was $625 Mil.
Revenue was 1310 + 1378 + 1390 + 1311 = $5,389 Mil.
Gross Profit was 244 + 283 + 237 + 196 = $960 Mil.
Total Current Assets was $2,476 Mil.
Total Assets was $10,285 Mil.
Property, Plant and Equipment(Net PPE) was $3,647 Mil.
Depreciation, Depletion and Amortization(DDA) was $390 Mil.
Selling, General & Admin. Expense(SGA) was $638 Mil.
Total Current Liabilities was $1,176 Mil.
Long-Term Debt was $1,816 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)|
|=||(608 / 5631)||/||(625 / 5389)|
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)|
|=||(333 / 5389)||/||(268 / 5631)|
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 - (1974 + 3422) / 9364)||/||(1 - (2476 + 3647) / 10285)|
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))|
|=||(390 / (390 + 3647))||/||(370 / (370 + 3422))|
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)|
|=||(607 / 5631)||/||(638 / 5389)|
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)|
|=||((1790 + 1029) / 9364)||/||((1816 + 1176) / 10285)|
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|
|=||(263 - -6||-||382)||/||9364|
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.
MeadWestvaco Corp has a M-score of -2.61 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
MeadWestvaco Corp Annual Data
MeadWestvaco Corp Quarterly Data