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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 -1.18. The lowest was -3.22. And the median was -2.55.
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 * 0.8255||+||0.528 * 1.1236||+||0.404 * 0.8319||+||0.892 * 1.0109||+||0.115 * 0.9295|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.153||+||4.679 * -0.0837||-||0.327 * 0.9248|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $439 Mil.|
Revenue was 986.766 + 1188.037 + 1185.002 + 1103.531 = $4,463 Mil.
Gross Profit was 236.188 + 311.276 + 353.181 + 284.546 = $1,185 Mil.
Total Current Assets was $2,175 Mil.
Total Assets was $5,575 Mil.
Property, Plant and Equipment(Net PPE) was $3,004 Mil.
Depreciation, Depletion and Amortization(DDA) was $246 Mil.
Selling, General & Admin. Expense(SGA) was $225 Mil.
Total Current Liabilities was $523 Mil.
Long-Term Debt was $764 Mil.
Net Income was 110.969 + 183.604 + 205.095 + 146.342 = $646 Mil.
Non Operating Income was 1.829 + 1.005 + 22.058 + 9.096 = $34 Mil.
Cash Flow from Operations was 237.536 + 405.945 + 244.799 + 190.556 = $1,079 Mil.
|Accounts Receivable was $526 Mil.
Revenue was 1135.871 + 1253.227 + 998.576 + 1027.676 = $4,415 Mil.
Gross Profit was 362.849 + 361.52 + 305.971 + 287.01 = $1,317 Mil.
Total Current Assets was $2,011 Mil.
Total Assets was $5,214 Mil.
Property, Plant and Equipment(Net PPE) was $2,758 Mil.
Depreciation, Depletion and Amortization(DDA) was $208 Mil.
Selling, General & Admin. Expense(SGA) was $193 Mil.
Total Current Liabilities was $537 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)|
|=||(438.538 / 4463.336)||/||(525.546 / 4415.35)|
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)|
|=||(311.276 / 4415.35)||/||(236.188 / 4463.336)|
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 - (2175.189 + 3004.067) / 5575.252)||/||(1 - (2011.287 + 2757.557) / 5213.99)|
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))|
|=||(208.486 / (208.486 + 2757.557))||/||(245.757 / (245.757 + 3004.067))|
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)|
|=||(225.364 / 4463.336)||/||(193.359 / 4415.35)|
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)|
|=||((764.115 + 522.642) / 5575.252)||/||((763.997 + 537.18) / 5213.99)|
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|
|=||(646.01 - 33.988||-||1078.836)||/||5575.252|
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 -3.03 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