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# Wells Fargo Beneish M-Score

: -2.28 (As of Today)
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Note: Financial institutions were excluded from the sample in Beneish paper when calculating Beneish M-Score. Thus, the prediction might not fit banks and insurance companies.

The zones of discrimination for M-Score is as such:

An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator.
An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.

Good Sign:

Beneish M-Score -2.28 no higher than -1.78, which implies that the company is unlikely to be a manipulator.

The historical rank and industry rank for Wells Fargo's Beneish M-Score or its related term are showing as below:

WFC' s Beneish M-Score Range Over the Past 10 Years
Min: -3.35   Med: -2.4   Max: 1.93
Current: -2.28

During the past 13 years, the highest Beneish M-Score of Wells Fargo was 1.93. The lowest was -3.35. And the median was -2.40.

## Wells Fargo Beneish M-Score Calculation

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski 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 Wells Fargo 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 * 1.1503 + 0.528 * 1 + 0.404 * 1.0806 + 0.892 * 0.97 + 0.115 * 1.0638 - 0.172 * SGAI + 4.679 * TATA - 0.327 * LVGI - 0.172 * 1.0028 + 4.679 * 0.0052 - 0.327 * 0.9209 = -2.28

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

 This Year (Jun22) TTM: Last Year (Jun21) TTM: Total Receivables was \$49,278 Mil. Revenue was 17028 + 17592 + 20856 + 18834 = \$74,310 Mil. Gross Profit was 17028 + 17592 + 20856 + 18834 = \$74,310 Mil. Total Current Assets was \$209,261 Mil. Total Assets was \$1,881,142 Mil. Property, Plant and Equipment(Net PPE) was \$18,225 Mil. Depreciation, Depletion and Amortization(DDA) was \$7,280 Mil. Selling, General, & Admin. Expense(SGA) was \$35,457 Mil. Total Current Liabilities was \$84,850 Mil. Long-Term Debt & Capital Lease Obligation was \$150,291 Mil. Net Income was 3119 + 3671 + 5750 + 5122 = \$17,662 Mil. Non Operating Income was 0 + 0 + 0 + 0 = \$0 Mil. Cash Flow from Operations was 7588 + 199 + 4817 + -4810 = \$7,794 Mil. Total Receivables was \$44,164 Mil. Revenue was 20270 + 18532 + 18489 + 19316 = \$76,607 Mil. Gross Profit was 20270 + 18532 + 18489 + 19316 = \$76,607 Mil. Total Current Assets was \$343,294 Mil. Total Assets was \$1,945,996 Mil. Property, Plant and Equipment(Net PPE) was \$19,571 Mil. Depreciation, Depletion and Amortization(DDA) was \$8,534 Mil. Selling, General, & Admin. Expense(SGA) was \$36,452 Mil. Total Current Liabilities was \$84,482 Mil. Long-Term Debt & Capital Lease Obligation was \$179,656 Mil.

1. DSRI = Days Sales in Receivables Index

Measured as the ratio of Revenue in Total Receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

 DSRI = (Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1) = (49278 / 74310) / (44164 / 76607) = 0.6631409 / 0.57650084 = 1.1503

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.

 GMI = GrossMargin_t-1 / GrossMargin_t = (GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t) = (76607 / 76607) / (74310 / 74310) = 1 / 1 = 1

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than Property, Plant and Equipment to Total Assets.

 AQI = (1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1) = (1 - (209261 + 18225) / 1881142) / (1 - (343294 + 19571) / 1945996) = 0.87907027 / 0.8135325 = 1.0806

4. SGI = Sales Growth Index

Ratio of Revenue 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.

 SGI = Sales_t / Sales_t-1 = Revenue_t / Revenue_t-1 = 74310 / 76607 = 0.97

5. DEPI = Depreciation Index

Measured as the ratio of the rate of Depreciation, Depletion and Amortization 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)) = (8534 / (8534 + 19571)) / (7280 / (7280 + 18225)) = 0.30364704 / 0.28543423 = 1.0638

Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.

6. SGAI = Sales, General and Administrative expenses Index

The ratio of Selling, General, & Admin. Expense(SGA) to Sales 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) = (35457 / 74310) / (36452 / 76607) = 0.47714978 / 0.47583119 = 1.0028

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 in leverage

 LVGI = ((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1) = ((150291 + 84850) / 1881142) / ((179656 + 84482) / 1945996) = 0.12499907 / 0.13573409 = 0.9209

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

 TATA = (IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t = (NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t = (17662 - 0 - 7794) / 1881142 = 0.0052

An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.

Wells Fargo has a M-score of -2.28 suggests that the company is unlikely to be a manipulator.

## Wells Fargo Beneish M-Score Related Terms

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## Wells Fargo Business Description 