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Wells Fargo (NYSE:WFC) Beneish M-Score

: -2.38 (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 -2.38 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: -2.65   Med: -2.39   Max: -2.23
Current: -2.38

During the past 13 years, the highest Beneish M-Score of Wells Fargo was -2.23. The lowest was -2.65. And the median was -2.39.


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 * 1.0904+0.528 * 1+0.404 * 0.943+0.892 * 1.1107+0.115 * 1.0762
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9468+4.679 * -0.010979-0.327 * 1.0699
=-2.38

* 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 (Dec23) TTM:Last Year (Dec22) TTM:
Total Receivables was $53,724 Mil.
Revenue was 20478 + 20857 + 20533 + 20729 = $82,597 Mil.
Gross Profit was 20478 + 20857 + 20533 + 20729 = $82,597 Mil.
Total Current Assets was $416,468 Mil.
Total Assets was $1,932,468 Mil.
Property, Plant and Equipment(Net PPE) was $18,236 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,271 Mil.
Selling, General, & Admin. Expense(SGA) was $36,641 Mil.
Total Current Liabilities was $83,093 Mil.
Long-Term Debt & Capital Lease Obligation was $207,588 Mil.
Net Income was 3446 + 5767 + 4938 + 4991 = $19,142 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 18202 + 15505 + -755 + 7406 = $40,358 Mil.
Total Receivables was $44,363 Mil.
Revenue was 20034 + 19566 + 17040 + 17728 = $74,368 Mil.
Gross Profit was 20034 + 19566 + 17040 + 17728 = $74,368 Mil.
Total Current Assets was $317,114 Mil.
Total Assets was $1,881,020 Mil.
Property, Plant and Equipment(Net PPE) was $17,977 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,832 Mil.
Selling, General, & Admin. Expense(SGA) was $34,845 Mil.
Total Current Liabilities was $89,578 Mil.
Long-Term Debt & Capital Lease Obligation was $174,870 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)
=(53724 / 82597) / (44363 / 74368)
=0.650435 / 0.596533
=1.0904

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)
=(74368 / 74368) / (82597 / 82597)
=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 - (416468 + 18236) / 1932468) / (1 - (317114 + 17977) / 1881020)
=0.775052 / 0.821857
=0.943

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
=82597 / 74368
=1.1107

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))
=(6832 / (6832 + 17977)) / (6271 / (6271 + 18236))
=0.275384 / 0.255886
=1.0762

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)
=(36641 / 82597) / (34845 / 74368)
=0.443612 / 0.468548
=0.9468

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)
=((207588 + 83093) / 1932468) / ((174870 + 89578) / 1881020)
=0.15042 / 0.140588
=1.0699

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
=(19142 - 0 - 40358) / 1932468
=-0.010979

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 -2.38 suggests that the company is unlikely to be a manipulator.


Wells Fargo Beneish M-Score Related Terms

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Wells Fargo (NYSE:WFC) Business Description

Address
420 Montgomery Street, San Francisco, CA, USA, 94104
Wells Fargo is one of the largest banks in the United States, with approximately $1.9 trillion in balance sheet assets. The company has four primary segments: consumer banking, commercial banking, corporate and investment banking, and wealth and investment management. It is almost entirely focused on the U.S.
Executives
Richard K Davis director 800 NICOLLET MALL, MINNEAPOLIS MN 55402
Thomas R Nides officer: Vice Chairman C/O WELLS FARGO & COMPANY, 420 MONTGOMERY STREET, SAN FRANCISCO CA 94104
Tracy M Kerrins officer: Sr. Executive Vice President 300 S BREVARD STREET, CHARLOTTE NC 28202
Kyle G Hranicky officer: Sr. Executive Vice President 1000 LOUISIANA STREET, HOUSTON TX 77002
Felicia F Norwood director 120 MONUMENT CIRCLE, INDIANAPOLIS IN 46204
Kleber Santos officer: Sr. Executive Vice President 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Ellen R Patterson officer: Sr. EVP and General Counsel 30 HUDSON YARDS, NEW YORK NY 10001
Kristy Fercho officer: Sr. Executive Vice President 5151 CORPORATE DRIVE, TROY MI 48098
Cecelia Morken director 26025 MUREAU ROAD, CALABASAS CA 91302
Beurden Saul Van officer: Sr. Executive Vice President 150 EAST 42ND STREET, NEW YORK NY 10017
Bei Ling officer: Sr. Executive Vice President 30 HUDSON YARDS, NEW YORK NY 10001
Ather Iii Williams officer: Sr. Executive Vice President 30 HUDSON YARDS, NEW YORK NY 10001
Michael P. Santomassimo officer: Sr. EVP & CFO 225 LIBERTY STREET, NEW YORK NY 10286
Mark A Chancy director 303 PEACHTREE ST., 30TH FLOOR, ATLANTA GA 30308
Lester Owens officer: Sr. Executive Vice President 240 GREENWICH STREET, NEW YORK NY 10286