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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.
Western Digital Corporation has a M-score of -2.86 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Western Digital Corporation was 14.28. The lowest was -16.56. And the median was -2.79.
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 Corporation 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 * 1.1592||+||0.528 * 1.0569||+||0.404 * 1.128||+||0.892 * 0.9757||+||0.115 * 0.865|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9949||+||4.679 * -0.1156||-||0.327 * 1.0992|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|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.
Net Income was 430 + 495 + -265 + 391 = $1,051 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 726 + 680 + 684 + 727 = $2,817 Mil.
|Accounts Receivable was $1,732 Mil.
Revenue was 3824 + 4035 + 4754 + 3035 = $15,648 Mil.
Gross Profit was 1059 + 1193 + 1472 + 977 = $4,701 Mil.
Total Current Assets was $7,175 Mil.
Total Assets was $13,929 Mil.
Property, Plant and Equipment(Net PPE) was $3,938 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,149 Mil.
Selling, General & Admin. Expense(SGA) was $821 Mil.
Total Current Liabilities was $3,326 Mil.
Long-Term Debt was $1,840 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)|
|=||(1959 / 15268)||/||(1732 / 15648)|
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)|
|=||(1088 / 15648)||/||(1141 / 15268)|
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 - (8288 + 3509) / 15282)||/||(1 - (7175 + 3938) / 13929)|
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))|
|=||(1149 / (1149 + 3938))||/||(1240 / (1240 + 3509))|
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)|
|=||(797 / 15268)||/||(821 / 15648)|
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)|
|=||((1610 + 4620) / 15282)||/||((1840 + 3326) / 13929)|
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|
|=||(1051 - 0||-||2817)||/||15282|
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 Corporation has a M-score of -2.86 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 Corporation Annual Data
Western Digital Corporation Quarterly Data