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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 -2.52.
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 * 0.8071||+||0.528 * 1.0389||+||0.404 * 0.7189||+||0.892 * 1.0901||+||0.115 * 0.8601|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2381||+||4.679 * -0.0737||-||0.327 * 0.9015|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $495 Mil.|
Revenue was 1188.037 + 1185.002 + 1103.531 + 1135.871 = $4,612 Mil.
Gross Profit was 311.276 + 353.181 + 284.546 + 362.849 = $1,312 Mil.
Total Current Assets was $2,248 Mil.
Total Assets was $5,524 Mil.
Property, Plant and Equipment(Net PPE) was $2,917 Mil.
Depreciation, Depletion and Amortization(DDA) was $240 Mil.
Selling, General & Admin. Expense(SGA) was $231 Mil.
Total Current Liabilities was $535 Mil.
Long-Term Debt was $764 Mil.
Net Income was 183.604 + 205.095 + 146.342 + 183.291 = $718 Mil.
Non Operating Income was 1.005 + 22.058 + 9.096 + -4.492 = $28 Mil.
Cash Flow from Operations was 405.945 + 244.799 + 190.556 + 256.252 = $1,098 Mil.
|Accounts Receivable was $563 Mil.
Revenue was 1253.227 + 998.576 + 1027.676 + 951.625 = $4,231 Mil.
Gross Profit was 361.52 + 305.971 + 287.01 + 295.671 = $1,250 Mil.
Total Current Assets was $1,952 Mil.
Total Assets was $5,126 Mil.
Property, Plant and Equipment(Net PPE) was $2,710 Mil.
Depreciation, Depletion and Amortization(DDA) was $190 Mil.
Selling, General & Admin. Expense(SGA) was $171 Mil.
Total Current Liabilities was $573 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)|
|=||(495.318 / 4612.441)||/||(562.963 / 4231.104)|
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)|
|=||(353.181 / 4231.104)||/||(311.276 / 4612.441)|
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 - (2248.43 + 2916.63) / 5524.405)||/||(1 - (1951.948 + 2710.475) / 5126.283)|
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))|
|=||(189.908 / (189.908 + 2710.475))||/||(240.321 / (240.321 + 2916.63))|
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)|
|=||(230.783 / 4612.441)||/||(170.988 / 4231.104)|
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)|
|=||((764.086 + 534.887) / 5524.405)||/||((763.968 + 573.036) / 5126.283)|
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|
|=||(718.332 - 27.667||-||1097.552)||/||5524.405|
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 -3.04 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