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GuruFocus has detected 8 Warning Signs with Yum Brands Inc $YUM.
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Yum Brands Inc (NYSE:YUM)
Beneish M-Score
-2.69 (As of Today)

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.

Yum Brands Inc has a M-score of -2.69 suggests that the company is not a manipulator.

YUM' s Beneish M-Score Range Over the Past 10 Years
Min: -4.83   Max: -1.16
Current: -2.69

-4.83
-1.16

During the past 13 years, the highest Beneish M-Score of Yum Brands Inc was -1.16. The lowest was -4.83. And the median was -2.74.


Definition

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 Yum Brands 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 * 0.8652+0.528 * 0.9462+0.404 * 1.3306+0.892 * 0.9816+0.115 * 0.4579
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.082+4.679 * 0.0685-0.327 * 2.2905
=-2.69

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $355 Mil.
Revenue was 1417 + -2577 + 3316 + 3008 = $5,164 Mil.
Gross Profit was 613 + 17 + 998 + 812 = $2,440 Mil.
Total Current Assets was $1,277 Mil.
Total Assets was $5,151 Mil.
Property, Plant and Equipment(Net PPE) was $2,084 Mil.
Depreciation, Depletion and Amortization(DDA) was $306 Mil.
Selling, General & Admin. Expense(SGA) was $1,112 Mil.
Total Current Liabilities was $1,558 Mil.
Long-Term Debt was $8,715 Mil.
Net Income was 280 + 267 + 622 + 339 = $1,508 Mil.
Non Operating Income was -28 + 0 + 0 + 0 = $-28 Mil.
Cash Flow from Operations was 288 + -338 + 646 + 587 = $1,183 Mil.
Accounts Receivable was $418 Mil.
Revenue was 1443 + -2714 + 3427 + 3105 = $5,261 Mil.
Gross Profit was 587 + 22 + 933 + 810 = $2,352 Mil.
Total Current Assets was $1,963 Mil.
Total Assets was $8,221 Mil.
Property, Plant and Equipment(Net PPE) was $4,111 Mil.
Depreciation, Depletion and Amortization(DDA) was $256 Mil.
Selling, General & Admin. Expense(SGA) was $1,047 Mil.
Total Current Liabilities was $4,648 Mil.
Long-Term Debt was $2,510 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(355 / 5164) / (418 / 5261)
=0.06874516 / 0.07945258
=0.8652

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(2352 / 5261) / (2440 / 5164)
=0.4470633 / 0.47250194
=0.9462

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (1277 + 2084) / 5151) / (1 - (1963 + 4111) / 8221)
=0.34750534 / 0.26116044
=1.3306

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=5164 / 5261
=0.9816

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))
=(256 / (256 + 4111)) / (306 / (306 + 2084))
=0.05862148 / 0.12803347
=0.4579

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)
=(1112 / 5164) / (1047 / 5261)
=0.21533695 / 0.19901159
=1.082

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)
=((8715 + 1558) / 5151) / ((2510 + 4648) / 8221)
=1.99437003 / 0.870697
=2.2905

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(1508 - -28 - 1183) / 5151
=0.0685

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.

Yum Brands Inc has a M-score of -2.69 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Yum Brands Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.93880.93781.08871.02331.00370.97471.10432.36620.87211.417
GMI 1.20481.21380.97220.91431.04480.98891.02220.67410.97840.8533
AQI 0.91571.08290.99880.91511.07051.12570.92960.93591.82360.6709
SGI 1.08941.08530.95861.04681.11311.07980.95970.50340.97770.8059
DEPI 0.94420.94711.00650.97150.97911.00620.97212.04790.56340.964
SGAI 0.75190.72930.84311.07990.94811.01930.97431.44611.09351.2623
LVGI 1.16321.17630.83950.94850.95610.93771.0311.10431.14842.5185
TATA -0.0909-0.0853-0.0466-0.0974-0.0963-0.0773-0.1279-0.01990.00990.0706
M-score -2.82-2.73-2.59-2.95-2.75-2.73-3.04-1.95-2.36-2.70

Yum Brands Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 2.36622.15662.11341.98350.87211.38141.45921.58431.4170.8652
GMI 0.67410.68660.69460.67010.97840.86540.85160.82860.85330.9462
AQI 0.93590.89410.93070.89331.82361.00971.02080.90680.67091.3306
SGI 0.50340.48860.47050.47980.97770.81130.80860.78230.80590.9816
DEPI 2.04792.0572.0211.98250.56341.18661.00871.01910.9640.4579
SGAI 1.44611.52711.56621.54731.09351.22681.24371.33871.26231.082
LVGI 1.10431.11231.11731.07761.14841.33641.39591.71762.51852.2905
TATA -0.0199-0.0179-0.0199-0.0590.00990.0350.02880.06340.07060.0685
M-score -1.95-2.17-2.23-2.54-2.36-2.33-2.33-2.26-2.70-2.69
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