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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 (UPS) was -0.52. The lowest was -3.62. And the median was -2.81.
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 (UPS) 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 * 0.9753||+||0.528 * 1.0071||+||0.404 * 1.1296||+||0.892 * 1.0504||+||0.115 * 0.9893|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0683||+||4.679 * -0.0766||-||0.327 * 1.052|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $6,661 Mil.|
Revenue was 15895 + 14290 + 14268 + 13779 = $58,232 Mil.
Gross Profit was 12846 + 10681 + 10718 + 10273 = $44,518 Mil.
Total Current Assets was $11,808 Mil.
Total Assets was $35,471 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 $8,639 Mil.
Long-Term Debt was $9,864 Mil.
Net Income was 453 + 1214 + 454 + 911 = $3,032 Mil.
Non Operating Income was -5 + 2 + 25 + 0 = $22 Mil.
Cash Flow from Operations was 1535 + 2359 + -435 + 2267 = $5,726 Mil.
|Accounts Receivable was $6,502 Mil.
Revenue was 14976 + 13521 + 13507 + 13434 = $55,438 Mil.
Gross Profit was 12113 + 10236 + 10250 + 10086 = $42,685 Mil.
Total Current Assets was $13,387 Mil.
Total Assets was $36,212 Mil.
Property, Plant and Equipment(Net PPE) was $17,961 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,867 Mil.
Selling, General & Admin. Expense(SGA) was $28,557 Mil.
Total Current Liabilities was $7,131 Mil.
Long-Term Debt was $10,824 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)|
|=||(6661 / 58232)||/||(6502 / 55438)|
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)|
|=||(10681 / 55438)||/||(12846 / 58232)|
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 - (11808 + 18281) / 35471)||/||(1 - (13387 + 17961) / 36212)|
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))|
|=||(1867 / (1867 + 17961))||/||(1923 / (1923 + 18281))|
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)|
|=||(32045 / 58232)||/||(28557 / 55438)|
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)|
|=||((9864 + 8639) / 35471)||/||((10824 + 7131) / 36212)|
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|
|=||(3032 - 22||-||5726)||/||35471|
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 (UPS) has a M-score of -2.79 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 (UPS) Annual Data
United Parcel Service Inc (UPS) Quarterly Data