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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 Union Pacific Corp was -1.69. The lowest was -7.31. And the median was -2.64.
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 Union Pacific 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 * 1.0431||+||0.528 * 0.9756||+||0.404 * 0.8359||+||0.892 * 1.0922||+||0.115 * 0.9876|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9562||+||4.679 * -0.0446||-||0.327 * 1.1013|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $1,611 Mil.|
Revenue was 6153 + 6182 + 6015 + 5638 = $23,988 Mil.
Gross Profit was 4379 + 4340 + 4140 + 3798 = $16,657 Mil.
Total Current Assets was $4,679 Mil.
Total Assets was $52,716 Mil.
Property, Plant and Equipment(Net PPE) was $46,272 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,904 Mil.
Selling, General & Admin. Expense(SGA) was $6,310 Mil.
Total Current Liabilities was $3,765 Mil.
Long-Term Debt was $11,018 Mil.
Net Income was 1431 + 1370 + 1291 + 1088 = $5,180 Mil.
Non Operating Income was 67 + 20 + 22 + 38 = $147 Mil.
Cash Flow from Operations was 2027 + 2137 + 1454 + 1767 = $7,385 Mil.
|Accounts Receivable was $1,414 Mil.
Revenue was 5630 + 5573 + 5470 + 5290 = $21,963 Mil.
Gross Profit was 3829 + 3810 + 3720 + 3520 = $14,879 Mil.
Total Current Assets was $3,990 Mil.
Total Assets was $49,731 Mil.
Property, Plant and Equipment(Net PPE) was $43,749 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,777 Mil.
Selling, General & Admin. Expense(SGA) was $6,042 Mil.
Total Current Liabilities was $3,791 Mil.
Long-Term Debt was $8,872 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)|
|=||(1611 / 23988)||/||(1414 / 21963)|
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)|
|=||(4340 / 21963)||/||(4379 / 23988)|
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 - (4679 + 46272) / 52716)||/||(1 - (3990 + 43749) / 49731)|
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))|
|=||(1777 / (1777 + 43749))||/||(1904 / (1904 + 46272))|
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)|
|=||(6310 / 23988)||/||(6042 / 21963)|
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)|
|=||((11018 + 3765) / 52716)||/||((8872 + 3791) / 49731)|
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|
|=||(5180 - 147||-||7385)||/||52716|
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.
Union Pacific Corp 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
Union Pacific Corp Annual Data
Union Pacific Corp Quarterly Data