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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.
Walgreen Co has a M-score of -2.27 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Walgreen Co was -1.43. The lowest was -3.04. And the median was -2.43.
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 Walgreen 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 * 1.1873||+||0.528 * 1.0221||+||0.404 * 1.1452||+||0.892 * 1.055||+||0.115 * 0.9613|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9629||+||4.679 * -0.0304||-||0.327 * 0.8211|
|This Year (May14) TTM:||Last Year (May13) TTM:|
|Accounts Receivable was $3,029 Mil.|
Revenue was 19401 + 19605 + 18329 + 17941 = $75,276 Mil.
Gross Profit was 5440 + 5650 + 5152 + 5191 = $21,433 Mil.
Total Current Assets was $11,928 Mil.
Total Assets was $37,391 Mil.
Property, Plant and Equipment(Net PPE) was $12,088 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,326 Mil.
Selling, General & Admin. Expense(SGA) was $17,785 Mil.
Total Current Liabilities was $8,409 Mil.
Long-Term Debt was $3,747 Mil.
Net Income was 722 + 754 + 695 + 657 = $2,828 Mil.
Non Operating Income was 124 + -59 + 225 + 43 = $333 Mil.
Cash Flow from Operations was 1272 + 1104 + 133 + 1123 = $3,632 Mil.
|Accounts Receivable was $2,418 Mil.
Revenue was 18313 + 18647 + 17316 + 17073 = $71,349 Mil.
Gross Profit was 5222 + 5607 + 5099 + 4835 = $20,763 Mil.
Total Current Assets was $12,571 Mil.
Total Assets was $35,841 Mil.
Property, Plant and Equipment(Net PPE) was $12,075 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,268 Mil.
Selling, General & Admin. Expense(SGA) was $17,506 Mil.
Total Current Liabilities was $9,690 Mil.
Long-Term Debt was $4,501 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)|
|=||(3029 / 75276)||/||(2418 / 71349)|
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)|
|=||(5650 / 71349)||/||(5440 / 75276)|
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 - (11928 + 12088) / 37391)||/||(1 - (12571 + 12075) / 35841)|
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))|
|=||(1268 / (1268 + 12075))||/||(1326 / (1326 + 12088))|
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)|
|=||(17785 / 75276)||/||(17506 / 71349)|
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)|
|=||((3747 + 8409) / 37391)||/||((4501 + 9690) / 35841)|
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|
|=||(2828 - 333||-||3632)||/||37391|
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.
Walgreen Co has a M-score of -2.27 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
Walgreen Co Annual Data
Walgreen Co Quarterly Data