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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 United Parcel Service Inc was -2.45. The lowest was -3.54. And the median was -2.77.
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 United Parcel Service 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 * 1.0686||+||0.528 * 0.9594||+||0.404 * 1.0512||+||0.892 * 1.0022||+||0.115 * 0.9333|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9661||+||4.679 * -0.0679||-||0.327 * 1.102|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $7,134 Mil.|
Revenue was 16054 + 14237 + 14095 + 13977 = $58,363 Mil.
Gross Profit was 12398 + 11091 + 11092 + 10835 = $45,416 Mil.
Total Current Assets was $13,208 Mil.
Total Assets was $38,311 Mil.
Property, Plant and Equipment(Net PPE) was $18,352 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,084 Mil.
Selling, General & Admin. Expense(SGA) was $31,028 Mil.
Total Current Liabilities was $10,696 Mil.
Long-Term Debt was $11,316 Mil.
Net Income was 1331 + 1257 + 1230 + 1026 = $4,844 Mil.
Non Operating Income was 3 + 4 + 4 + 4 = $15 Mil.
Cash Flow from Operations was 1015 + 2176 + 1488 + 2751 = $7,430 Mil.
|Accounts Receivable was $6,661 Mil.
Revenue was 15895 + 14290 + 14268 + 13779 = $58,232 Mil.
Gross Profit was 11802 + 10681 + 10718 + 10273 = $43,474 Mil.
Total Current Assets was $11,218 Mil.
Total Assets was $35,440 Mil.
Property, Plant and Equipment(Net PPE) was $18,281 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,923 Mil.
Selling, General & Admin. Expense(SGA) was $32,045 Mil.
Total Current Liabilities was $8,621 Mil.
Long-Term Debt was $9,856 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)|
|=||(7134 / 58363)||/||(6661 / 58232)|
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)|
|=||(11091 / 58232)||/||(12398 / 58363)|
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 - (13208 + 18352) / 38311)||/||(1 - (11218 + 18281) / 35440)|
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))|
|=||(1923 / (1923 + 18281))||/||(2084 / (2084 + 18352))|
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)|
|=||(31028 / 58363)||/||(32045 / 58232)|
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)|
|=||((11316 + 10696) / 38311)||/||((9856 + 8621) / 35440)|
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|
|=||(4844 - 15||-||7430)||/||38311|
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.
United Parcel Service Inc has a M-score of -2.77 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
United Parcel Service Inc Annual Data
United Parcel Service Inc Quarterly Data