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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 0.01. The lowest was -7.31. And the median was -2.65.
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 * 0.9906||+||0.528 * 0.9333||+||0.404 * 0.7315||+||0.892 * 0.931||+||0.115 * 0.9979|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1086||+||4.679 * -0.078||-||0.327 * 1.0716|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $1,508 Mil.|
Revenue was 5562 + 5429 + 5614 + 0 = $16,605 Mil.
Gross Profit was 4489 + 4288 + 4096 + 0 = $12,873 Mil.
Total Current Assets was $3,942 Mil.
Total Assets was $53,763 Mil.
Property, Plant and Equipment(Net PPE) was $48,149 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,984 Mil.
Selling, General & Admin. Expense(SGA) was $4,555 Mil.
Total Current Liabilities was $3,508 Mil.
Long-Term Debt was $12,798 Mil.
Net Income was 1300 + 1204 + 1151 + 0 = $3,655 Mil.
Non Operating Income was 28 + 141 + 25 + 0 = $194 Mil.
Cash Flow from Operations was 1852 + 1709 + 2064 + 2027 = $7,652 Mil.
|Accounts Receivable was $1,635 Mil.
Revenue was 6182 + 6015 + 5638 + 0 = $17,835 Mil.
Gross Profit was 4650 + 4456 + 3798 + 0 = $12,904 Mil.
Total Current Assets was $4,780 Mil.
Total Assets was $52,568 Mil.
Property, Plant and Equipment(Net PPE) was $45,553 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,873 Mil.
Selling, General & Admin. Expense(SGA) was $4,413 Mil.
Total Current Liabilities was $3,833 Mil.
Long-Term Debt was $11,045 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)|
|=||(1508 / 16605)||/||(1635 / 17835)|
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)|
|=||(4288 / 17835)||/||(4489 / 16605)|
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 - (3942 + 48149) / 53763)||/||(1 - (4780 + 45553) / 52568)|
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))|
|=||(1873 / (1873 + 45553))||/||(1984 / (1984 + 48149))|
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)|
|=||(4555 / 16605)||/||(4413 / 17835)|
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)|
|=||((12798 + 3508) / 53763)||/||((11045 + 3833) / 52568)|
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|
|=||(3655 - 194||-||7652)||/||53763|
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 -3.10 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