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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 -2.51.
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 * 1.094||+||0.528 * 0.982||+||0.404 * 1.0707||+||0.892 * 1.1745||+||0.115 * 0.9997|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1126||+||4.679 * -0.0673||-||0.327 * 0.8671|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $512 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.
Net Income was 183.291 + 167.757 + 169.443 + 158.032 = $679 Mil.
Non Operating Income was -7.161 + -2.67 + 4.601 + 2.509 = $-3 Mil.
Cash Flow from Operations was 256.252 + 343.882 + 219.737 + 212.505 = $1,032 Mil.
|Accounts Receivable was $399 Mil.
Revenue was 951.625 + 1004.165 + 939.047 + 864.647 = $3,759 Mil.
Gross Profit was 295.671 + 304.471 + 273.487 + 227.809 = $1,101 Mil.
Total Current Assets was $1,649 Mil.
Total Assets was $4,061 Mil.
Property, Plant and Equipment(Net PPE) was $2,088 Mil.
Depreciation, Depletion and Amortization(DDA) was $158 Mil.
Selling, General & Admin. Expense(SGA) was $148 Mil.
Total Current Liabilities was $405 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)|
|=||(512.078 / 4415.35)||/||(398.561 / 3759.484)|
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)|
|=||(361.52 / 3759.484)||/||(362.849 / 4415.35)|
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 - (2011.287 + 2757.557) / 5213.99)||/||(1 - (1649.082 + 2088.014) / 4060.909)|
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))|
|=||(157.808 / (157.808 + 2088.014))||/||(208.486 / (208.486 + 2757.557))|
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)|
|=||(193.359 / 4415.35)||/||(147.974 / 3759.484)|
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)|
|=||((763.997 + 537.18) / 5213.99)||/||((763.879 + 404.858) / 4060.909)|
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|
|=||(678.523 - -2.721||-||1032.376)||/||5213.99|
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 -2.51 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