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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 Westlake Chemical Corp was 4.16. The lowest was -3.22. And the median was -2.53.
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 * 0.9602||+||0.528 * 1.0977||+||0.404 * 0.8873||+||0.892 * 0.9652||+||0.115 * 0.991|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1039||+||4.679 * -0.0737||-||0.327 * 0.94|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $451 Mil.|
Revenue was 975.187 + 986.766 + 1188.037 + 1185.002 = $4,335 Mil.
Gross Profit was 255.585 + 236.188 + 311.276 + 353.181 = $1,156 Mil.
Total Current Assets was $2,192 Mil.
Total Assets was $5,724 Mil.
Property, Plant and Equipment(Net PPE) was $3,115 Mil.
Depreciation, Depletion and Amortization(DDA) was $253 Mil.
Selling, General & Admin. Expense(SGA) was $223 Mil.
Total Current Liabilities was $506 Mil.
Long-Term Debt was $758 Mil.
Net Income was 123.128 + 110.969 + 183.604 + 205.095 = $623 Mil.
Non Operating Income was 2.645 + 1.829 + 1.005 + 22.058 = $28 Mil.
Cash Flow from Operations was 128.935 + 237.536 + 405.945 + 244.799 = $1,017 Mil.
|Accounts Receivable was $487 Mil.
Revenue was 1103.531 + 1135.871 + 1253.227 + 998.576 = $4,491 Mil.
Gross Profit was 284.546 + 362.849 + 361.52 + 305.971 = $1,315 Mil.
Total Current Assets was $2,002 Mil.
Total Assets was $5,180 Mil.
Property, Plant and Equipment(Net PPE) was $2,751 Mil.
Depreciation, Depletion and Amortization(DDA) was $221 Mil.
Selling, General & Admin. Expense(SGA) was $210 Mil.
Total Current Liabilities was $453 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)|
|=||(451.376 / 4334.992)||/||(487.003 / 4491.205)|
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)|
|=||(236.188 / 4491.205)||/||(255.585 / 4334.992)|
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 - (2191.734 + 3114.821) / 5724.401)||/||(1 - (2002.162 + 2751.486) / 5179.785)|
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))|
|=||(221.155 / (221.155 + 2751.486))||/||(252.83 / (252.83 + 3114.821))|
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)|
|=||(223.407 / 4334.992)||/||(209.67 / 4491.205)|
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)|
|=||((758.3 + 506.161) / 5724.401)||/||((764.027 + 453.207) / 5179.785)|
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|
|=||(622.796 - 27.537||-||1017.215)||/||5724.401|
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 -2.89 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