Stock Analysis on Net

Apple Inc. (NASDAQ:AAPL)

Financial Reporting Quality: Aggregate Accruals 

Microsoft Excel

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

Apple Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Sep 30, 2023 Sep 24, 2022 Sep 25, 2021 Sep 26, 2020 Sep 28, 2019 Sep 29, 2018
Operating Assets
Total assets 352,583 352,755 351,002 323,888 338,516 365,725
Less: Cash and cash equivalents 29,965 23,646 34,940 38,016 48,844 25,913
Less: Current marketable securities 31,590 24,658 27,699 52,927 51,713 40,388
Operating assets 291,028 304,451 288,363 232,945 237,959 299,424
Operating Liabilities
Total liabilities 290,437 302,083 287,912 258,549 248,028 258,578
Less: Current portion of finance leases 165 129 79 24
Less: Commercial paper 5,985 9,982 6,000 4,996 5,980 11,964
Less: Current portion of term debt 9,822 11,128 9,613 8,773 10,260 8,784
Less: Non-current portion of term debt 95,281 98,959 109,106 98,667 91,807 93,735
Less: Non-current portion of finance leases 859 812 769 637
Operating liabilities 178,325 181,073 162,345 145,452 139,981 144,095
 
Net operating assets1 112,703 123,378 126,018 87,493 97,978 155,329
Balance-sheet-based aggregate accruals2 (10,675) (2,640) 38,525 (10,485) (57,351)
Financial Ratio
Balance-sheet-based accruals ratio3 -9.04% -2.12% 36.09% -11.31% -45.28%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Arista Networks Inc. 17.14% 106.22% 24.14% 89.72%
Cisco Systems Inc. -12.09% 5.96% 20.24% -7.26% 11.05%
Super Micro Computer Inc. 3.74% 58.35% 8.42% 20.97% -16.37%
Balance-Sheet-Based Accruals Ratio, Sector
Technology Hardware & Equipment -9.11% 0.76% 32.81% -10.00% 200.00%
Balance-Sheet-Based Accruals Ratio, Industry
Information Technology 9.17% 21.79% 21.33% 2.87% 200.00%

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-24), 10-K (reporting date: 2021-09-25), 10-K (reporting date: 2020-09-26), 10-K (reporting date: 2019-09-28), 10-K (reporting date: 2018-09-29).

1 2023 Calculation
Net operating assets = Operating assets – Operating liabilities
= 291,028178,325 = 112,703

2 2023 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2023 – Net operating assets2022
= 112,703123,378 = -10,675

3 2023 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -10,675 ÷ [(112,703 + 123,378) ÷ 2] = -9.04%

4 Click competitor name to see calculations.

Financial 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, Apple Inc. deteriorated earnings quality from 2022 to 2023.

Cash-Flow-Statement-Based Accruals Ratio

Apple Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Sep 30, 2023 Sep 24, 2022 Sep 25, 2021 Sep 26, 2020 Sep 28, 2019 Sep 29, 2018
Net income 96,995 99,803 94,680 57,411 55,256 59,531
Less: Cash generated by operating activities 110,543 122,151 104,038 80,674 69,391 77,434
Less: Cash (used in) generated by investing activities 3,705 (22,354) (14,545) (4,289) 45,896 16,066
Cash-flow-statement-based aggregate accruals (17,253) 6 5,187 (18,974) (60,031) (33,969)
Financial Ratio
Cash-flow-statement-based accruals ratio1 -14.62% 0.00% 4.86% -20.46% -47.40%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Arista Networks Inc. 36.37% 52.90% 147.50% 164.55%
Cisco Systems Inc. -7.65% -10.18% 1.64% -32.20% -80.97%
Super Micro Computer Inc. 0.89% 56.84% 5.08% 19.76% -21.24%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Technology Hardware & Equipment -12.43% -0.99% 4.79% -22.09% -127.84%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Information Technology 1.25% 3.82% 10.69% -8.36% -22.15%

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-24), 10-K (reporting date: 2021-09-25), 10-K (reporting date: 2020-09-26), 10-K (reporting date: 2019-09-28), 10-K (reporting date: 2018-09-29).

1 2023 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -17,253 ÷ [(112,703 + 123,378) ÷ 2] = -14.62%

2 Click competitor name to see calculations.

Financial 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, Apple Inc. deteriorated earnings quality from 2022 to 2023.