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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 1.42. The lowest was -3.79. And the median was -2.73.
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 * 0.7997||+||0.528 * 0.9948||+||0.404 * 1.0833||+||0.892 * 0.9631||+||0.115 * 1.004|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1511||+||4.679 * -0.0512||-||0.327 * 0.8949|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $1,532 Mil.|
Revenue was 3191 + 3550 + 3888 + 3943 = $14,572 Mil.
Gross Profit was 930 + 1032 + 1110 + 1149 = $4,221 Mil.
Total Current Assets was $8,517 Mil.
Total Assets was $15,181 Mil.
Property, Plant and Equipment(Net PPE) was $2,965 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,114 Mil.
Selling, General & Admin. Expense(SGA) was $949 Mil.
Total Current Liabilities was $3,242 Mil.
Long-Term Debt was $2,156 Mil.
Net Income was 220 + 384 + 438 + 423 = $1,465 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 488 + 684 + 243 + 827 = $2,242 Mil.
|Accounts Receivable was $1,989 Mil.
Revenue was 3651 + 3703 + 3972 + 3804 = $15,130 Mil.
Gross Profit was 1029 + 1076 + 1156 + 1099 = $4,360 Mil.
Total Current Assets was $8,720 Mil.
Total Assets was $15,499 Mil.
Property, Plant and Equipment(Net PPE) was $3,293 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,244 Mil.
Selling, General & Admin. Expense(SGA) was $856 Mil.
Total Current Liabilities was $3,845 Mil.
Long-Term Debt was $2,313 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)|
|=||(1532 / 14572)||/||(1989 / 15130)|
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)|
|=||(1032 / 15130)||/||(930 / 14572)|
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 - (8517 + 2965) / 15181)||/||(1 - (8720 + 3293) / 15499)|
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))|
|=||(1244 / (1244 + 3293))||/||(1114 / (1114 + 2965))|
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)|
|=||(949 / 14572)||/||(856 / 15130)|
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)|
|=||((2156 + 3242) / 15181)||/||((2313 + 3845) / 15499)|
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|
|=||(1465 - 0||-||2242)||/||15181|
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 -2.90 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