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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 -3.65. And the median was -2.86.
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 * 0.9329||+||0.528 * 0.9829||+||0.404 * 1.0901||+||0.892 * 1.0303||+||0.115 * 0.9498|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0098||+||4.679 * -0.1132||-||0.327 * 1.0345|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $5,618 Mil.|
Revenue was 14095 + 13977 + 15895 + 14290 = $58,257 Mil.
Gross Profit was 11322 + 10835 + 12846 + 10681 = $45,684 Mil.
Total Current Assets was $13,768 Mil.
Total Assets was $37,251 Mil.
Property, Plant and Equipment(Net PPE) was $17,970 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,998 Mil.
Selling, General & Admin. Expense(SGA) was $31,471 Mil.
Total Current Liabilities was $10,303 Mil.
Long-Term Debt was $9,900 Mil.
Net Income was 1230 + 1026 + 453 + 1214 = $3,923 Mil.
Non Operating Income was 4 + 4 + -5 + 2 = $5 Mil.
Cash Flow from Operations was 1488 + 2751 + 1535 + 2359 = $8,133 Mil.
|Accounts Receivable was $5,845 Mil.
Revenue was 14268 + 13779 + 14976 + 13521 = $56,544 Mil.
Gross Profit was 10959 + 10273 + 12113 + 10236 = $43,581 Mil.
Total Current Assets was $12,341 Mil.
Total Assets was $34,861 Mil.
Property, Plant and Equipment(Net PPE) was $17,787 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,868 Mil.
Selling, General & Admin. Expense(SGA) was $30,248 Mil.
Total Current Liabilities was $8,337 Mil.
Long-Term Debt was $9,940 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)|
|=||(5618 / 58257)||/||(5845 / 56544)|
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)|
|=||(10835 / 56544)||/||(11322 / 58257)|
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 - (13768 + 17970) / 37251)||/||(1 - (12341 + 17787) / 34861)|
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))|
|=||(1868 / (1868 + 17787))||/||(1998 / (1998 + 17970))|
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)|
|=||(31471 / 58257)||/||(30248 / 56544)|
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)|
|=||((9900 + 10303) / 37251)||/||((9940 + 8337) / 34861)|
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|
|=||(3923 - 5||-||8133)||/||37251|
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 -3.04 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