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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 Universal Forest Products Inc was 0.55. The lowest was -3.61. And the median was -2.53.
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 Universal Forest Products Inc 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 * 0.9569||+||0.528 * 0.9402||+||0.404 * 1.0357||+||0.892 * 1.1121||+||0.115 * 0.9069|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0289||+||4.679 * -0.048||-||0.327 * 0.9836|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $274 Mil.|
Revenue was 762.275 + 838.171 + 633.025 + 620.09 = $2,854 Mil.
Gross Profit was 110.706 + 112.443 + 79.582 + 72.755 = $375 Mil.
Total Current Assets was $648 Mil.
Total Assets was $1,112 Mil.
Property, Plant and Equipment(Net PPE) was $255 Mil.
Depreciation, Depletion and Amortization(DDA) was $41 Mil.
Selling, General & Admin. Expense(SGA) was $255 Mil.
Total Current Liabilities was $214 Mil.
Long-Term Debt was $85 Mil.
Net Income was 25.556 + 25.976 + 10.162 + 9.313 = $71 Mil.
Non Operating Income was 0.089 + 0.112 + 0.083 + 0.132 = $0 Mil.
Cash Flow from Operations was 84.587 + 87.367 + -50.545 + 2.592 = $124 Mil.
|Accounts Receivable was $257 Mil.
Revenue was 713.489 + 772.752 + 553.998 + 525.737 = $2,566 Mil.
Gross Profit was 89.586 + 96.988 + 66.012 + 64.868 = $317 Mil.
Total Current Assets was $585 Mil.
Total Assets was $1,015 Mil.
Property, Plant and Equipment(Net PPE) was $245 Mil.
Depreciation, Depletion and Amortization(DDA) was $35 Mil.
Selling, General & Admin. Expense(SGA) was $223 Mil.
Total Current Liabilities was $193 Mil.
Long-Term Debt was $85 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)|
|=||(273.737 / 2853.561)||/||(257.235 / 2565.976)|
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)|
|=||(112.443 / 2565.976)||/||(110.706 / 2853.561)|
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 - (647.525 + 254.53) / 1111.918)||/||(1 - (585.395 + 245.036) / 1015.483)|
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))|
|=||(35.335 / (35.335 + 245.036))||/||(41.082 / (41.082 + 254.53))|
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)|
|=||(255.027 / 2853.561)||/||(222.875 / 2565.976)|
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)|
|=||((84.722 + 214.301) / 1111.918)||/||((84.7 + 192.941) / 1015.483)|
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|
|=||(71.007 - 0.416||-||124.001)||/||1111.918|
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.
Universal Forest Products Inc has a M-score of -2.67 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
Universal Forest Products Inc Annual Data
Universal Forest Products Inc Quarterly Data