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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.
Westlake Chemical Corp has a M-score of -3.48 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Westlake Chemical Corp was 4.06. The lowest was -3.65. And the median was -2.69.
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 Westlake Chemical 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 * 0.7834||+||0.528 * 0.8414||+||0.404 * 0.8703||+||0.892 * 1.1623||+||0.115 * 1.0835|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.977||+||4.679 * -0.1874||-||0.327 * 0.8433|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $433 Mil.|
Revenue was 998.576 + 1027.676 + 951.625 + 1004.165 = $3,982 Mil.
Gross Profit was 305.971 + 287.01 + 295.671 + 304.471 = $1,193 Mil.
Total Current Assets was $1,823 Mil.
Total Assets was $4,369 Mil.
Property, Plant and Equipment(Net PPE) was $2,217 Mil.
Depreciation, Depletion and Amortization(DDA) was $293 Mil.
Selling, General & Admin. Expense(SGA) was $154 Mil.
Total Current Liabilities was $387 Mil.
Long-Term Debt was $764 Mil.
Net Income was 169.443 + 158.032 + 170.972 + 170.29 = $669 Mil.
Non Operating Income was 4.601 + 2.509 + 3.653 + -0.287 = $10 Mil.
Cash Flow from Operations was 219.737 + 212.505 + 752.729 + 292.02 = $1,477 Mil.
|Accounts Receivable was $476 Mil.
Revenue was 939.047 + 864.647 + 801.041 + 821.175 = $3,426 Mil.
Gross Profit was 273.487 + 227.809 + 190.248 + 172.179 = $864 Mil.
Total Current Assets was $1,601 Mil.
Total Assets was $3,708 Mil.
Property, Plant and Equipment(Net PPE) was $1,786 Mil.
Depreciation, Depletion and Amortization(DDA) was $259 Mil.
Selling, General & Admin. Expense(SGA) was $136 Mil.
Total Current Liabilities was $394 Mil.
Long-Term Debt was $764 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)|
|=||(433.104 / 3982.042)||/||(475.638 / 3425.91)|
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)|
|=||(287.01 / 3425.91)||/||(305.971 / 3982.042)|
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 - (1822.503 + 2217.049) / 4369.369)||/||(1 - (1601.123 + 1785.574) / 3708.335)|
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))|
|=||(258.531 / (258.531 + 1785.574))||/||(293.01 / (293.01 + 2217.049))|
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)|
|=||(154.098 / 3982.042)||/||(135.693 / 3425.91)|
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)|
|=||((763.938 + 386.929) / 4369.369)||/||((763.82 + 394.456) / 3708.335)|
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|
|=||(668.737 - 10.476||-||1476.991)||/||4369.369|
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.
Westlake Chemical Corp has a M-score of -3.48 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
Westlake Chemical Corp Annual Data
Westlake Chemical Corp Quarterly Data