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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 14.30. The lowest was -16.56. And the median was -2.82.
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 * 0.8758||+||0.528 * 1.0391||+||0.404 * 0.967||+||0.892 * 0.8442||+||0.115 * 1.0354|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.352||+||4.679 * -0.0862||-||0.327 * 0.8955|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $1,254 Mil.|
Revenue was 2822 + 3317 + 3360 + 3191 = $12,690 Mil.
Gross Profit was 753 + 906 + 955 + 930 = $3,544 Mil.
Total Current Assets was $8,740 Mil.
Total Assets was $14,947 Mil.
Property, Plant and Equipment(Net PPE) was $2,687 Mil.
Depreciation, Depletion and Amortization(DDA) was $984 Mil.
Selling, General & Admin. Expense(SGA) was $1,082 Mil.
Total Current Liabilities was $2,781 Mil.
Long-Term Debt was $2,000 Mil.
Net Income was 74 + 251 + 283 + 220 = $828 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 485 + 598 + 545 + 488 = $2,116 Mil.
|Accounts Receivable was $1,696 Mil.
Revenue was 3550 + 3888 + 3943 + 3651 = $15,032 Mil.
Gross Profit was 1032 + 1110 + 1149 + 1071 = $4,362 Mil.
Total Current Assets was $8,429 Mil.
Total Assets was $15,176 Mil.
Property, Plant and Equipment(Net PPE) was $3,051 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,172 Mil.
Selling, General & Admin. Expense(SGA) was $948 Mil.
Total Current Liabilities was $3,218 Mil.
Long-Term Debt was $2,203 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)|
|=||(1254 / 12690)||/||(1696 / 15032)|
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)|
|=||(4362 / 15032)||/||(3544 / 12690)|
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 - (8740 + 2687) / 14947)||/||(1 - (8429 + 3051) / 15176)|
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))|
|=||(1172 / (1172 + 3051))||/||(984 / (984 + 2687))|
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)|
|=||(1082 / 12690)||/||(948 / 15032)|
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)|
|=||((2000 + 2781) / 14947)||/||((2203 + 3218) / 15176)|
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|
|=||(828 - 0||-||2116)||/||14947|
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 -3.15 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