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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 -3.35. And the median was -2.42.
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 * 1.0082||+||0.528 * 0.9307||+||0.404 * 0.9903||+||0.892 * 1.0769||+||0.115 * 0.9705|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0439||+||4.679 * -0.0156||-||0.327 * 1.097|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $196 Mil.|
Revenue was 620.09 + 713.489 + 772.752 + 553.998 = $2,660 Mil.
Gross Profit was 72.755 + 89.586 + 96.988 + 66.012 = $325 Mil.
Total Current Assets was $573 Mil.
Total Assets was $1,024 Mil.
Property, Plant and Equipment(Net PPE) was $248 Mil.
Depreciation, Depletion and Amortization(DDA) was $36 Mil.
Selling, General & Admin. Expense(SGA) was $230 Mil.
Total Current Liabilities was $175 Mil.
Long-Term Debt was $99 Mil.
Net Income was 9.313 + 19.234 + 21.789 + 7.216 = $58 Mil.
Non Operating Income was 0.132 + 0.118 + 0.078 + 0.051 = $0 Mil.
Cash Flow from Operations was 2.592 + 47.724 + 77.536 + -54.732 = $73 Mil.
|Accounts Receivable was $180 Mil.
Revenue was 525.737 + 651.78 + 738.436 + 554.494 = $2,470 Mil.
Gross Profit was 64.868 + 78.289 + 80.216 + 57.818 = $281 Mil.
Total Current Assets was $496 Mil.
Total Assets was $917 Mil.
Property, Plant and Equipment(Net PPE) was $237 Mil.
Depreciation, Depletion and Amortization(DDA) was $34 Mil.
Selling, General & Admin. Expense(SGA) was $204 Mil.
Total Current Liabilities was $139 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)|
|=||(195.912 / 2660.329)||/||(180.452 / 2470.447)|
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)|
|=||(89.586 / 2470.447)||/||(72.755 / 2660.329)|
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 - (573.006 + 248.269) / 1023.8)||/||(1 - (496.398 + 237.41) / 916.987)|
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))|
|=||(33.564 / (33.564 + 237.41))||/||(36.323 / (36.323 + 248.269))|
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)|
|=||(229.773 / 2660.329)||/||(204.392 / 2470.447)|
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)|
|=||((98.645 + 175.46) / 1023.8)||/||((84.7 + 139.099) / 916.987)|
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|
|=||(57.552 - 0.379||-||73.12)||/||1023.8|
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 -2.56 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
Universal Forest Products Inc Annual Data
Universal Forest Products Inc Quarterly Data