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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 -0.90. 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 * 0.9873||+||0.528 * 0.9462||+||0.404 * 0.8871||+||0.892 * 0.8775||+||0.115 * 0.9982|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1003||+||4.679 * -0.0555||-||0.327 * 1.1278|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $1,355 Mil.|
Revenue was 4829 + 5208 + 5562 + 5429 = $21,028 Mil.
Gross Profit was 3651 + 3890 + 4187 + 4288 = $16,016 Mil.
Total Current Assets was $5,083 Mil.
Total Assets was $55,772 Mil.
Property, Plant and Equipment(Net PPE) was $49,071 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,023 Mil.
Selling, General & Admin. Expense(SGA) was $5,317 Mil.
Total Current Liabilities was $3,287 Mil.
Long-Term Debt was $14,791 Mil.
Net Income was 979 + 1117 + 1300 + 1204 = $4,600 Mil.
Non Operating Income was 44 + 27 + 28 + 141 = $240 Mil.
Cash Flow from Operations was 2173 + 1719 + 1852 + 1709 = $7,453 Mil.
|Accounts Receivable was $1,564 Mil.
Revenue was 5614 + 6153 + 6182 + 6015 = $23,964 Mil.
Gross Profit was 4096 + 4379 + 4340 + 4456 = $17,271 Mil.
Total Current Assets was $4,479 Mil.
Total Assets was $53,145 Mil.
Property, Plant and Equipment(Net PPE) was $46,928 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,931 Mil.
Selling, General & Admin. Expense(SGA) was $5,507 Mil.
Total Current Liabilities was $3,390 Mil.
Long-Term Debt was $11,884 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)|
|=||(1355 / 21028)||/||(1564 / 23964)|
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)|
|=||(3890 / 23964)||/||(3651 / 21028)|
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 - (5083 + 49071) / 55772)||/||(1 - (4479 + 46928) / 53145)|
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))|
|=||(1931 / (1931 + 46928))||/||(2023 / (2023 + 49071))|
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)|
|=||(5317 / 21028)||/||(5507 / 23964)|
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)|
|=||((14791 + 3287) / 55772)||/||((11884 + 3390) / 53145)|
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|
|=||(4600 - 240||-||7453)||/||55772|
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 -2.99 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