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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 -0.92. 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 * 1.0415||+||0.528 * 0.9564||+||0.404 * 0.9618||+||0.892 * 0.8713||+||0.115 * 1.0039|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0625||+||4.679 * -0.052||-||0.327 * 1.0653|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $1,373 Mil.|
Revenue was 4770 + 4829 + 5208 + 5562 = $20,369 Mil.
Gross Profit was 3568 + 3651 + 3890 + 4187 = $15,296 Mil.
Total Current Assets was $4,566 Mil.
Total Assets was $55,690 Mil.
Property, Plant and Equipment(Net PPE) was $49,461 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,030 Mil.
Selling, General & Admin. Expense(SGA) was $4,860 Mil.
Total Current Liabilities was $3,095 Mil.
Long-Term Debt was $14,777 Mil.
Net Income was 979 + 979 + 1117 + 1300 = $4,375 Mil.
Non Operating Income was 74 + 44 + 27 + 28 = $173 Mil.
Cash Flow from Operations was 1352 + 2173 + 1719 + 1852 = $7,096 Mil.
|Accounts Receivable was $1,513 Mil.
Revenue was 5429 + 5614 + 6153 + 6182 = $23,378 Mil.
Gross Profit was 3976 + 4096 + 4379 + 4340 = $16,791 Mil.
Total Current Assets was $4,983 Mil.
Total Assets was $54,177 Mil.
Property, Plant and Equipment(Net PPE) was $47,512 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,958 Mil.
Selling, General & Admin. Expense(SGA) was $5,250 Mil.
Total Current Liabilities was $3,413 Mil.
Long-Term Debt was $12,908 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)|
|=||(1373 / 20369)||/||(1513 / 23378)|
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)|
|=||(16791 / 23378)||/||(15296 / 20369)|
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 - (4566 + 49461) / 55690)||/||(1 - (4983 + 47512) / 54177)|
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))|
|=||(1958 / (1958 + 47512))||/||(2030 / (2030 + 49461))|
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)|
|=||(4860 / 20369)||/||(5250 / 23378)|
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)|
|=||((14777 + 3095) / 55690)||/||((12908 + 3413) / 54177)|
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|
|=||(4375 - 173||-||7096)||/||55690|
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 -2.87 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