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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 -2.56 suggests that the company is not a 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 -2.45.
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 * 0.8974||+||0.528 * 0.7872||+||0.404 * 1.3926||+||0.892 * 1.1534||+||0.115 * 1.1217|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0347||+||4.679 * -0.0495||-||0.327 * 0.824|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $422 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.
Net Income was 158.032 + 170.972 + 170.29 + 145.816 = $645 Mil.
Non Operating Income was 2.509 + 0.567 + -0.287 + -0.095 = $3 Mil.
Cash Flow from Operations was 212.505 + 205.229 + 292.02 + 139.228 = $849 Mil.
|Accounts Receivable was $408 Mil.
Revenue was 864.647 + 801.041 + 821.175 + 913.958 = $3,401 Mil.
Gross Profit was 227.809 + 190.248 + 172.179 + 201.896 = $792 Mil.
Total Current Assets was $1,725 Mil.
Total Assets was $3,559 Mil.
Property, Plant and Equipment(Net PPE) was $1,629 Mil.
Depreciation, Depletion and Amortization(DDA) was $145 Mil.
Selling, General & Admin. Expense(SGA) was $128 Mil.
Total Current Liabilities was $400 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)|
|=||(421.879 / 3922.513)||/||(407.58 / 3400.821)|
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)|
|=||(295.671 / 3400.821)||/||(287.01 / 3922.513)|
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 - (1687.263 + 2150.643) / 4171.956)||/||(1 - (1725.278 + 1629.309) / 3559.225)|
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))|
|=||(144.503 / (144.503 + 1629.309))||/||(168.424 / (168.424 + 2150.643))|
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)|
|=||(153.175 / 3922.513)||/||(128.351 / 3400.821)|
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)|
|=||((763.909 + 359.934) / 4171.956)||/||((763.79 + 399.815) / 3559.225)|
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|
|=||(645.11 - 2.694||-||848.982)||/||4171.956|
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 -2.56 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