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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- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
- Analysis of Debt
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Balance-Sheet-Based Accruals Ratio
Sep 29, 2024 | Sep 24, 2023 | Sep 25, 2022 | Sep 26, 2021 | Sep 27, 2020 | Sep 29, 2019 | ||
---|---|---|---|---|---|---|---|
Operating Assets | |||||||
Total assets | |||||||
Less: Cash and cash equivalents | |||||||
Less: Marketable securities | |||||||
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 | |||||||
Advanced Micro Devices Inc. | |||||||
Analog Devices Inc. | |||||||
Applied Materials Inc. | |||||||
Broadcom Inc. | |||||||
Intel Corp. | |||||||
KLA Corp. | |||||||
Lam Research Corp. | |||||||
Micron Technology Inc. | |||||||
NVIDIA Corp. | |||||||
Texas Instruments Inc. | |||||||
Balance-Sheet-Based Accruals Ratio, Sector | |||||||
Semiconductors & Semiconductor Equipment | |||||||
Balance-Sheet-Based Accruals Ratio, Industry | |||||||
Information Technology |
Based on: 10-K (reporting date: 2024-09-29), 10-K (reporting date: 2023-09-24), 10-K (reporting date: 2022-09-25), 10-K (reporting date: 2021-09-26), 10-K (reporting date: 2020-09-27), 10-K (reporting date: 2019-09-29).
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
- Over the five-year period, net operating assets demonstrated an overall increasing trend. Starting at 10,589 million US dollars in 2020, there was a notable increase in 2021 to 13,281 million US dollars. The value then surged substantially in 2022, reaching 27,113 million US dollars. This level slightly declined during 2023 to 25,655 million US dollars before rising again in 2024 to 27,608 million US dollars. This pattern indicates an expansion in operating resources employed by the company, with a peak in 2022, a minor contraction in 2023, and recovery in 2024.
- Balance-Sheet-Based Aggregate Accruals
- The aggregate accruals exhibited considerable volatility across the analyzed periods. Initially, accruals grew from 2,007 million in 2020 to 2,692 million in 2021. A significant surge was observed in 2022, where accruals reached 13,832 million, marking a substantial rise that aligns with the increase in net operating assets for the same year. However, in 2023, the accruals sharply reversed to a negative figure of -1,458 million, indicating a considerable reversal or reduction in accruals. This negative value was followed by a return to a modest positive level of 1,953 million in 2024. The fluctuation highlights potential variability in earnings quality or changes in accounting estimates and judgments.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio, which measures balance-sheet-based aggregate accruals as a percentage of net operating assets, mirrored the volatile pattern of aggregate accruals. The ratio started at 20.94% in 2020 and showed a gradual increase to 22.56% in 2021. A sharp spike occurred in 2022, with the ratio peaking at 68.49%, substantially higher than previous years, which may indicate an increased level of accrual adjustments relative to net operating assets. In 2023, the ratio turned negative to -5.53%, consistent with the negative accrual figure reported that year, suggesting an unusual reversal in accruals. In 2024, the ratio normalized somewhat to 7.33%, indicating a return toward typical accrual behavior but still below earlier levels seen in 2020 and 2021.
- Insights and Implications
- The data reveals pronounced volatility in balance-sheet-based aggregate accruals and their ratio relative to net operating assets, particularly in 2022 and 2023. The substantial increase in net operating assets and accruals in 2022 coupled with a subsequent negative reversal in 2023 could signify an anomalous year or the impact of distinct transactions affecting accrual estimates. The normalization observed in 2024 suggests a reversion toward more stable accrual levels. Such fluctuations in accrual measures could affect the reliability of earnings and signal varying degrees of financial reporting quality over the examined timeframe.
Cash-Flow-Statement-Based Accruals Ratio
Sep 29, 2024 | Sep 24, 2023 | Sep 25, 2022 | Sep 26, 2021 | Sep 27, 2020 | Sep 29, 2019 | ||
---|---|---|---|---|---|---|---|
Net income | |||||||
Less: Net cash provided by operating activities | |||||||
Less: Net cash used 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 | |||||||
Advanced Micro Devices Inc. | |||||||
Analog Devices Inc. | |||||||
Applied Materials Inc. | |||||||
Broadcom Inc. | |||||||
Intel Corp. | |||||||
KLA Corp. | |||||||
Lam Research Corp. | |||||||
Micron Technology Inc. | |||||||
NVIDIA Corp. | |||||||
Texas Instruments Inc. | |||||||
Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
Semiconductors & Semiconductor Equipment | |||||||
Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
Information Technology |
Based on: 10-K (reporting date: 2024-09-29), 10-K (reporting date: 2023-09-24), 10-K (reporting date: 2022-09-25), 10-K (reporting date: 2021-09-26), 10-K (reporting date: 2020-09-27), 10-K (reporting date: 2019-09-29).
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 demonstrate a consistent upward trajectory from 2020 to 2024. Starting at $10,589 million in 2020, the figure increases significantly to $27,608 million by 2024. Notably, there is a sharp rise from 2021 to 2022, followed by a slight decline in 2023, which is then reversed with an increase in 2024.
- Cash-flow-statement-based aggregate accruals
- The aggregate accruals exhibit considerable volatility throughout the period. After peaking at $9,474 million in 2022, the accruals drop sharply into negative territory in 2023, showing a value of -$3,845 million. In 2024, there is a recovery to a positive $1,474 million, yet the figure remains considerably lower than the peak observed in 2022.
- Cash-flow-statement-based accruals ratio
- This ratio mirrors the trends seen in the aggregate accruals but expressed as a percentage of net operating assets. It starts relatively high at 48.48% in 2020, then declines significantly to 15.61% in 2021. In 2022, the ratio climbs again to 46.91%, before dropping to a negative value of -14.57% in 2023. By 2024, the ratio returns to a positive but lower level of 5.53%, indicating greater variability and fluctuation over time.
- Overall insights
- The analysis reveals that net operating assets have grown steadily, reflecting expansion or accumulation of operating resources. However, the cash-flow-statement-based measures display marked instability, with large swings in accruals and accrual ratios suggesting fluctuations in earnings quality or timing differences between cash flows and accrual-based accounting figures. The considerable negative movement in 2023 for accruals and their ratio could indicate a period of less reliable accrual performance or significant changes in working capital components.