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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 -2.81.
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 * 1.0237||+||0.528 * 1.0211||+||0.404 * 2.3165||+||0.892 * 1.1864||+||0.115 * 0.7807|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.4105||+||4.679 * -0.0826||-||0.327 * 1.7131|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $2,004 Mil.|
Revenue was 4888 + 4714 + 3495 + 2822 = $15,919 Mil.
Gross Profit was 1533 + 1335 + 821 + 753 = $4,442 Mil.
Total Current Assets was $9,606 Mil.
Total Assets was $28,975 Mil.
Property, Plant and Equipment(Net PPE) was $3,238 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,688 Mil.
Selling, General & Admin. Expense(SGA) was $1,727 Mil.
Total Current Liabilities was $4,088 Mil.
Long-Term Debt was $12,944 Mil.
Net Income was 235 + -366 + -366 + 74 = $-423 Mil.
Non Operating Income was -24 + -272 + -73 + 0 = $-369 Mil.
Cash Flow from Operations was 1060 + 440 + 355 + 485 = $2,340 Mil.
|Accounts Receivable was $1,650 Mil.
Revenue was 3317 + 3360 + 3191 + 3550 = $13,418 Mil.
Gross Profit was 906 + 955 + 930 + 1032 = $3,823 Mil.
Total Current Assets was $8,948 Mil.
Total Assets was $15,466 Mil.
Property, Plant and Equipment(Net PPE) was $2,801 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,023 Mil.
Selling, General & Admin. Expense(SGA) was $1,032 Mil.
Total Current Liabilities was $3,245 Mil.
Long-Term Debt was $2,062 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)|
|=||(2004 / 15919)||/||(1650 / 13418)|
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)|
|=||(3823 / 13418)||/||(4442 / 15919)|
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 - (9606 + 3238) / 28975)||/||(1 - (8948 + 2801) / 15466)|
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))|
|=||(1023 / (1023 + 2801))||/||(1688 / (1688 + 3238))|
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)|
|=||(1727 / 15919)||/||(1032 / 13418)|
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)|
|=||((12944 + 4088) / 28975)||/||((2062 + 3245) / 15466)|
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|
|=||(-423 - -369||-||2340)||/||28975|
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 -2.46 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