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.
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- Cash Flow Statement
- Analysis of Solvency Ratios
- Analysis of Geographic Areas
- Enterprise Value to EBITDA (EV/EBITDA)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
- Price to Operating Profit (P/OP) since 2005
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Balance-Sheet-Based Accruals Ratio
Jan 31, 2024 | Jan 31, 2023 | Jan 31, 2022 | Jan 31, 2021 | Jan 31, 2020 | Jan 31, 2019 | ||
---|---|---|---|---|---|---|---|
Operating Assets | |||||||
Total assets | |||||||
Less: Cash and cash equivalents | |||||||
Less: Marketable securities | |||||||
Operating assets | |||||||
Operating Liabilities | |||||||
Total liabilities | |||||||
Less: Current portion of long-term notes payable, net | |||||||
Less: Long-term notes payable, net, excluding current portion | |||||||
Operating liabilities | |||||||
Net operating assets1 | |||||||
Balance-sheet-based aggregate accruals2 | |||||||
Financial Ratio | |||||||
Balance-sheet-based accruals ratio3 | |||||||
Benchmarks | |||||||
Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
Accenture PLC | |||||||
Adobe Inc. | |||||||
Cadence Design Systems Inc. | |||||||
CrowdStrike Holdings Inc. | |||||||
Fair Isaac Corp. | |||||||
International Business Machines Corp. | |||||||
Intuit Inc. | |||||||
Microsoft Corp. | |||||||
Oracle Corp. | |||||||
Palantir Technologies Inc. | |||||||
Palo Alto Networks Inc. | |||||||
Salesforce Inc. | |||||||
ServiceNow Inc. | |||||||
Synopsys Inc. | |||||||
Workday Inc. | |||||||
Balance-Sheet-Based Accruals Ratio, Sector | |||||||
Software & Services | |||||||
Balance-Sheet-Based Accruals Ratio, Industry | |||||||
Information Technology |
Based on: 10-K (reporting date: 2024-01-31), 10-K (reporting date: 2023-01-31), 10-K (reporting date: 2022-01-31), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-01-31).
1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= – =
3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
4 Click competitor name to see calculations.
- Net Operating Assets
- The net operating assets exhibit a generally increasing trend over the five-year period. Starting from a low base of 102 million US dollars in early 2020, the value surged significantly to 746 million in 2021, and further peaked at 1,713 million in 2022. There was a moderate decline to 1,354 million in 2023, followed by a rebound to 1,893 million in early 2024. This pattern indicates underlying growth in operating assets with a temporary contraction before a renewed expansion.
- Balance-sheet-based Aggregate Accruals
- The balance-sheet-based aggregate accruals show considerable volatility throughout the period. The figure starts with a substantial negative value of -821 million in 2020, then abruptly shifts to a positive 644 million in 2021, increasing to 967 million in 2022. This is followed by a decline to -359 million in 2023 and a subsequent rise to 539 million in 2024. These fluctuations reflect oscillating accrual components that may result from changes in accounting estimates, provisions, or timing of expenses and revenues.
- Balance-sheet-based Accruals Ratio
- The accruals ratio, expressed as a percentage, mirrors the high variability seen in aggregate accruals, starting at a significantly negative ratio of -160.2% in 2020. It then reverses dramatically to a positive 151.86% in 2021, decreasing to 78.69% in 2022. In 2023, it turns negative again at -23.39%, before rising to a positive 33.2% in 2024. This oscillation indicates inconsistency in accruals relative to net operating assets, suggesting periods of aggressive or conservative accounting practices affecting earnings quality.
Cash-Flow-Statement-Based Accruals Ratio
Jan 31, 2024 | Jan 31, 2023 | Jan 31, 2022 | Jan 31, 2021 | Jan 31, 2020 | Jan 31, 2019 | ||
---|---|---|---|---|---|---|---|
Net income (loss) | |||||||
Less: Net cash provided by operating activities | |||||||
Less: Net cash used in investing activities | |||||||
Cash-flow-statement-based aggregate accruals | |||||||
Financial Ratio | |||||||
Cash-flow-statement-based accruals ratio1 | |||||||
Benchmarks | |||||||
Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
Accenture PLC | |||||||
Adobe Inc. | |||||||
Cadence Design Systems Inc. | |||||||
CrowdStrike Holdings Inc. | |||||||
Fair Isaac Corp. | |||||||
International Business Machines Corp. | |||||||
Intuit Inc. | |||||||
Microsoft Corp. | |||||||
Oracle Corp. | |||||||
Palantir Technologies Inc. | |||||||
Palo Alto Networks Inc. | |||||||
Salesforce Inc. | |||||||
ServiceNow Inc. | |||||||
Synopsys Inc. | |||||||
Workday Inc. | |||||||
Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
Software & Services | |||||||
Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
Information Technology |
Based on: 10-K (reporting date: 2024-01-31), 10-K (reporting date: 2023-01-31), 10-K (reporting date: 2022-01-31), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-01-31).
1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
2 Click competitor name to see calculations.
The data presents several key financial measures over a five-year period, highlighting notable fluctuations and patterns in the company's operating assets and accruals.
- Net Operating Assets
- There is a general upward trend in net operating assets from 102 million US dollars in 2020 to 1893 million in 2024. This indicates a substantial increase in the investment in operating resources over the period. However, a decline is observed in 2023, dropping to 1354 million from 1713 million in 2022, before rising sharply again in 2024. This suggests a fluctuation in asset utilization or investment strategy within that timeframe.
- Cash-flow-statement-based Aggregate Accruals
- The aggregate accruals exhibit significant variability. In 2020, the accruals were negative, indicating potential cash flow challenges or adjustments, at -1143 million. This shifted to positive territory for the next two years (175 million in 2021 and 560 million in 2022), signaling improved alignment between earnings and cash flows or recognition of revenues and expenses. However, in 2023, accruals turned sharply negative again (-1105 million), before reverting to a small positive value (95 million) in 2024. The high volatility suggests inconsistencies or changes in earnings quality or working capital management across the years.
- Cash-flow-statement-based Accruals Ratio
- This ratio mirrors the direction of aggregate accruals but also emphasizes the proportionate impact relative to cash flows. The ratio was substantially negative in 2020 (-223.04%), indicating that accruals significantly offset operating cash flows, potentially signaling earnings manipulation or aggressive accounting. The ratio improved drastically in 2021 and 2022, registering positive values above 40%, which may indicate more sustainable earnings recognition. Another sharp reversal occurs in 2023, with a ratio of -72.07%, reflecting again a dominance of accruals over cash flow in an adverse sense. By 2024, the ratio improves to 5.85%, suggesting a relatively balanced relationship between accruals and cash flows. The fluctuations imply variability in earnings quality and the reliability of net income as a proxy for cash generation.
Overall, the data reveals a company experiencing substantial changes in operating asset levels and accrual measures over the five-year period. The frequent and significant swings in accruals and the accruals ratio suggest periods of altered earnings quality or accounting practices. The trend underscores the importance of closely monitoring these indicators for assessing financial reporting quality and cash flow sustainability.