Home Depot Inc. (HD) | Aggregate Accruals
Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.
Balance-Sheet-Based Accruals Ratio
Home Depot Inc., balance sheet computation of aggregate accruals
USD $ in millions
| Feb 3, 2013 | Jan 29, 2012 | Jan 30, 2011 | Jan 31, 2010 | Feb 1, 2009 | Feb 3, 2008 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 41,084 | 40,518 | 40,125 | 40,877 | 41,164 | 44,324 | |
| Less: Cash and cash equivalents | 2,494 | 1,987 | 545 | 1,421 | 519 | 445 | |
| Operating assets | 38,590 | 38,531 | 39,580 | 39,456 | 40,645 | 43,879 | |
| Operating Liabilities | |||||||
| Total liabilities | 23,307 | 22,620 | 21,236 | 21,484 | 23,387 | 26,610 | |
| Less: Short-term debt | – | – | – | – | – | 1,747 | |
| Less: Current installments of long-term debt | 1,321 | 30 | 1,042 | 1,020 | 1,767 | 300 | |
| Less: Long-term debt, excluding current installments | 9,475 | 10,758 | 8,707 | 8,662 | 9,667 | 11,383 | |
| Operating liabilities | 12,511 | 11,832 | 11,487 | 11,802 | 11,953 | 13,180 | |
| Net operating assets1 | 26,079 | 26,699 | 28,093 | 27,654 | 28,692 | 30,699 | |
| Balance-sheet-based aggregate accruals2 | (620) | (1,394) | 439 | (1,038) | (2,007) | ||
| Balance-Sheet-Based Accruals Ratio, Comparison to Industry | |||||||
| Home Depot Inc.3 | -2.35% | -5.09% | 1.57% | -3.68% | -6.76% | ||
| Industry, Consumer Services | –% | 5.58% | 3.03% | 2.47% | -8.99% | ||
2013 Calculations
1 Net operating assets = Operating assets – Operating liabilities
= 38,590 – 12,511 = 26,079
2 Balance-sheet-based aggregate accruals = Net operating assets 2013 – Net operating assets 2012
= 26,079 – 26,699 = -620
3 Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -620 ÷ [(26,079 + 26,699) ÷ 2] = -2.35%
| Ratio | Description | The company |
|---|---|---|
| Balance-sheet-based accruals ratio | Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. | Using the balance-sheet-based accruals ratio, Home Depot Inc. improved earnings quality from 2012 to 2013. |
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Cash-Flow-Statement-Based Accruals Ratio
Home Depot Inc., cash flow statement computation of aggregate accruals
USD $ in millions
| Feb 3, 2013 | Jan 29, 2012 | Jan 30, 2011 | Jan 31, 2010 | Feb 1, 2009 | Feb 3, 2008 | ||
|---|---|---|---|---|---|---|---|
| Net earnings | 4,535 | 3,883 | 3,338 | 2,661 | 2,260 | 4,395 | |
| Less: Net cash provided by operating activities | 6,975 | 6,651 | 4,585 | 5,125 | 5,528 | 5,727 | |
| Less: Net cash (used in) provided by investing activities | (1,432) | (1,129) | (1,012) | (755) | (1,729) | 4,758 | |
| Cash-flow-statement-based aggregate accruals | (1,008) | (1,639) | (235) | (1,709) | (1,539) | (6,090) | |
| Cash-Flow-Statement-Based Accruals Ratio, Comparison to Industry | |||||||
| Home Depot Inc.1 | -3.82% | -5.98% | -0.84% | -6.07% | -5.18% | ||
| Industry, Consumer Services | –% | 3.78% | 2.06% | -0.31% | -0.96% | ||
2013 Calculations
1 Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -1,008 ÷ [(26,079 + 26,699) ÷ 2] = -3.82%
| Ratio | Description | The company |
|---|---|---|
| Cash-flow-statement-based accruals ratio | Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. | Using the cash-flow-statement-based accruals ratio, Home Depot Inc. improved earnings quality from 2012 to 2013. |
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