Financial Reporting Quality: 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.
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Selected Financial Data since 2005
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Revenues
- Analysis of Debt
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Balance-Sheet-Based Accruals Ratio
Netflix Inc., balance sheet computation of aggregate accruals
US$ in thousands
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | ||||||
| Less: Cash and cash equivalents | ||||||
| Less: Short-term investments | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Less: Short-term debt | ||||||
| Less: Long-term debt | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Media & Entertainment | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Communication Services | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 demonstrate an overall upward trajectory from 25,214,339 thousand US dollars in 2021 to 30,742,632 thousand US dollars in 2024. There was a notable increase in 2022 to 29,072,025 thousand US dollars, followed by a slight decline in 2023 to 27,993,688 thousand US dollars. However, the upward trend resumed in 2024, reaching the highest reported value in the observed period.
- Balance-sheet-based aggregate accruals
- The balance-sheet-based aggregate accruals exhibit a fluctuating pattern. Starting at 6,045,676 thousand US dollars in 2021, this figure declined substantially to 3,857,686 thousand US dollars in 2022. A significant shift occurred in 2023, where accruals turned negative at -1,078,337 thousand US dollars, indicating a reversal in the trend of accrual activities. In 2024, accruals returned to a positive value of 2,748,944 thousand US dollars, though remaining below the initial levels observed in 2021 and 2022.
- Balance-sheet-based accruals ratio
- The balance-sheet-based accruals ratio parallels the trend seen in aggregate accruals. It starts at 27.24% in 2021 and declines to 14.21% in 2022. The ratio then moves into negative territory at -3.78% in 2023, reflecting the negative accruals value in that year. By 2024, the ratio has rebounded to a positive 9.36%, although it remains substantially lower than the initial 2021 figure. This oscillation suggests variability in the accrual components relative to net operating assets over the period.
Cash-Flow-Statement-Based Accruals Ratio
Netflix Inc., cash flow statement computation of aggregate accruals
US$ in thousands
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Net income | ||||||
| Less: Net cash provided by operating activities | ||||||
| Less: Net cash (used in) provided by investing activities | ||||||
| Cash-flow-statement-based aggregate accruals | ||||||
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | ||||||
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Media & Entertainment | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Communication Services | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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.
- Net Operating Assets
- The net operating assets exhibited an overall upward trend from 25,214,339 thousand US dollars in 2021 to 30,742,632 thousand US dollars in 2024. After increasing to 29,072,025 thousand in 2022, there was a slight dip to 27,993,688 thousand in 2023, followed by a renewed increase in 2024. This pattern indicates some fluctuation but an overall expansion in net operating assets during the period.
- Cash-Flow-Statement-Based Aggregate Accruals
- Aggregate accruals showed variability with a substantial drop in 2023. Starting at 6,063,471 thousand US dollars in 2021, the value declined to 4,542,059 thousand in 2022, turning negative to -2,408,062 thousand in 2023, before recovering to 3,532,051 thousand in 2024. The negative figure in 2023 suggests an unusual or non-recurring influence on accruals during that year.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio followed a similar pattern to the aggregate accruals, decreasing from 27.32% in 2021 to 16.73% in 2022, then turning negative to -8.44% in 2023, before ascending again to 12.03% in 2024. This ratio’s volatility, including the negative value in 2023, highlights potential concerns regarding the quality or consistency of earnings in that period.