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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 -2.49.
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 * 1.0522||+||0.528 * 1.0107||+||0.404 * 1.0275||+||0.892 * 1.145||+||0.115 * 0.9762|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1955||+||4.679 * -0.0671||-||0.327 * 0.8724|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|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.
Net Income was 146.342 + 183.291 + 167.757 + 169.443 = $667 Mil.
Non Operating Income was 9.096 + -7.161 + -2.67 + 4.601 = $4 Mil.
Cash Flow from Operations was 190.556 + 256.252 + 343.882 + 219.737 = $1,010 Mil.
|Accounts Receivable was $404 Mil.
Revenue was 1027.676 + 951.625 + 1004.165 + 939.047 = $3,923 Mil.
Gross Profit was 287.01 + 295.671 + 304.471 + 273.487 = $1,161 Mil.
Total Current Assets was $1,687 Mil.
Total Assets was $4,172 Mil.
Property, Plant and Equipment(Net PPE) was $2,151 Mil.
Depreciation, Depletion and Amortization(DDA) was $168 Mil.
Selling, General & Admin. Expense(SGA) was $153 Mil.
Total Current Liabilities was $360 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)|
|=||(487.003 / 4491.205)||/||(404.22 / 3922.513)|
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)|
|=||(362.849 / 3922.513)||/||(284.546 / 4491.205)|
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 - (2002.162 + 2751.486) / 5179.785)||/||(1 - (1687.263 + 2150.643) / 4171.956)|
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))|
|=||(168.424 / (168.424 + 2150.643))||/||(221.155 / (221.155 + 2751.486))|
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)|
|=||(209.67 / 4491.205)||/||(153.175 / 3922.513)|
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)|
|=||((764.027 + 453.207) / 5179.785)||/||((763.909 + 359.934) / 4171.956)|
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|
|=||(666.833 - 3.866||-||1010.427)||/||5179.785|
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 -2.59 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