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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 -2.36. The lowest was -3.88. And the median was -2.75.
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 * 1.0043||+||0.528 * 0.9904||+||0.404 * 0.9811||+||0.892 * 1.0314||+||0.115 * 0.9488|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9769||+||4.679 * -0.037||-||0.327 * 1.0396|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $6,272 Mil.|
Revenue was 14928 + 14629 + 14418 + 16054 = $60,029 Mil.
Gross Profit was 11541 + 11426 + 11310 + 12398 = $46,675 Mil.
Total Current Assets was $12,853 Mil.
Total Assets was $38,342 Mil.
Property, Plant and Equipment(Net PPE) was $18,489 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,202 Mil.
Selling, General & Admin. Expense(SGA) was $31,952 Mil.
Total Current Liabilities was $10,889 Mil.
Long-Term Debt was $11,506 Mil.
Net Income was 1270 + 1269 + 1131 + 1331 = $5,001 Mil.
Non Operating Income was 13 + 8 + 17 + 3 = $41 Mil.
Cash Flow from Operations was 670 + 2023 + 2670 + 1015 = $6,378 Mil.
|Accounts Receivable was $6,055 Mil.
Revenue was 14237 + 14095 + 13977 + 15895 = $58,204 Mil.
Gross Profit was 11091 + 11092 + 10835 + 11802 = $44,820 Mil.
Total Current Assets was $13,581 Mil.
Total Assets was $39,002 Mil.
Property, Plant and Equipment(Net PPE) was $18,163 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,040 Mil.
Selling, General & Admin. Expense(SGA) was $31,712 Mil.
Total Current Liabilities was $11,869 Mil.
Long-Term Debt was $10,044 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)|
|=||(6272 / 60029)||/||(6055 / 58204)|
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)|
|=||(44820 / 58204)||/||(46675 / 60029)|
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 - (12853 + 18489) / 38342)||/||(1 - (13581 + 18163) / 39002)|
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))|
|=||(2040 / (2040 + 18163))||/||(2202 / (2202 + 18489))|
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)|
|=||(31952 / 60029)||/||(31712 / 58204)|
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)|
|=||((11506 + 10889) / 38342)||/||((10044 + 11869) / 39002)|
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|
|=||(5001 - 41||-||6378)||/||38342|
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 -2.65 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