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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 Western Digital Corp was 14.28. The lowest was -16.56. And the median was -2.80.
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 Western Digital 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 * 0.9649||+||0.528 * 0.9783||+||0.404 * 0.979||+||0.892 * 0.9946||+||0.115 * 0.9388|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1871||+||4.679 * -0.0598||-||0.327 * 0.8975|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $1,880 Mil.|
Revenue was 3888 + 3943 + 3651 + 3703 = $15,185 Mil.
Gross Profit was 1132 + 1149 + 1071 + 1060 = $4,412 Mil.
Total Current Assets was $8,660 Mil.
Total Assets was $15,139 Mil.
Property, Plant and Equipment(Net PPE) was $3,099 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,194 Mil.
Selling, General & Admin. Expense(SGA) was $941 Mil.
Total Current Liabilities was $3,289 Mil.
Long-Term Debt was $2,250 Mil.
Net Income was 460 + 423 + 317 + 375 = $1,575 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 243 + 827 + 712 + 698 = $2,480 Mil.
|Accounts Receivable was $1,959 Mil.
Revenue was 3972 + 3804 + 3728 + 3764 = $15,268 Mil.
Gross Profit was 1141 + 1088 + 1050 + 1061 = $4,340 Mil.
Total Current Assets was $8,288 Mil.
Total Assets was $15,282 Mil.
Property, Plant and Equipment(Net PPE) was $3,509 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,240 Mil.
Selling, General & Admin. Expense(SGA) was $797 Mil.
Total Current Liabilities was $4,620 Mil.
Long-Term Debt was $1,610 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)|
|=||(1880 / 15185)||/||(1959 / 15268)|
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)|
|=||(1149 / 15268)||/||(1132 / 15185)|
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 - (8660 + 3099) / 15139)||/||(1 - (8288 + 3509) / 15282)|
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))|
|=||(1240 / (1240 + 3509))||/||(1194 / (1194 + 3099))|
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)|
|=||(941 / 15185)||/||(797 / 15268)|
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)|
|=||((2250 + 3289) / 15139)||/||((1610 + 4620) / 15282)|
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|
|=||(1575 - 0||-||2480)||/||15139|
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.
Western Digital Corp has a M-score of -2.82 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
Western Digital Corp Annual Data
Western Digital Corp Quarterly Data