Stock Analysis on Net

Super Micro Computer Inc. (NASDAQ:SMCI)

$24.99

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.

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Balance-Sheet-Based Accruals Ratio

Super Micro Computer Inc., balance sheet computation of aggregate accruals

US$ in thousands

Microsoft Excel
Jun 30, 2024 Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019
Operating Assets
Total assets
Less: Cash and cash equivalents
Operating assets
Operating Liabilities
Total liabilities
Less: Lines of credit and current portion of term loans
Less: Term loans, non-current
Less: Convertible notes
Operating liabilities
 
Net operating assets1
Balance-sheet-based aggregate accruals2
Financial Ratio
Balance-sheet-based accruals ratio3
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Balance-Sheet-Based Accruals Ratio, Sector
Technology Hardware & Equipment
Balance-Sheet-Based Accruals Ratio, Industry
Information Technology

Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).

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 general upward trend over the five-year period analyzed. Starting at approximately $885 million in mid-2020, the figure increased steadily to around $962 million in 2021. A notable surge occurred from 2021 to 2022, with the value nearly doubling to approximately $1.76 billion. The upward trajectory continued in 2023, reaching about $1.82 billion. A sharp and significant increase is observed in 2024, where net operating assets surged to nearly $5.92 billion, marking more than a threefold rise compared to the previous year.
Balance-Sheet-Based Aggregate Accruals
The aggregate accruals demonstrate considerable volatility throughout the years. The value started at $168 million in 2020 and then decreased substantially to approximately $78 million in 2021. In 2022, accruals spiked sharply to nearly $793 million, followed by a sharp decline to $67 million in 2023. By 2024, the accruals escalated markedly to around $4.10 billion, reflecting an extraordinary increase that correlates with the surge seen in net operating assets in the same year.
Balance-Sheet-Based Accruals Ratio
The accruals ratio, expressed as a percentage of net operating assets, shows notable fluctuation and an overall increasing trend. It starts at roughly 21% in 2020, then falls significantly to 8.4% in 2021. In 2022, the ratio jumps sharply to 58.4%, indicating a considerable increase in accruals relative to net operating assets. The ratio falls again to 3.74% in 2023, reaching its lowest point in the observed period. However, in 2024, there is a dramatic rise to 105.88%, indicating that the balance-sheet-based accruals have exceeded the reported net operating assets in relative terms, which may warrant closer scrutiny regarding the quality and sustainability of earnings.

Cash-Flow-Statement-Based Accruals Ratio

Super Micro Computer Inc., cash flow statement computation of aggregate accruals

US$ in thousands

Microsoft Excel
Jun 30, 2024 Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019
Net income
Less: Net cash provided by (used in) 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
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Technology Hardware & Equipment
Cash-Flow-Statement-Based Accruals Ratio, Industry
Information Technology

Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).

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 exhibit a general upward trend over the five-year period. Starting at 884,575 thousand US dollars in 2020, there is a steady increase to 962,322 in 2021 and a significant jump to 1,755,114 in 2022. The growth continues but at a slower pace reaching 1,822,013 in 2023. However, in 2024, there is a sharp increase to 5,921,749 thousand US dollars, indicating substantial asset growth in that year.
Cash-flow-statement-based Aggregate Accruals
The aggregate accruals show considerable volatility across the periods. They begin at 158,230 thousand US dollars in 2020 and decline sharply to 46,926 in 2021. In 2022, there is a pronounced increase to 772,246. This is followed by a dramatic decrease to 15,904 in 2023. In 2024, the accruals rise significantly again to 3,832,886 thousand US dollars, reflecting large fluctuations and a substantial increase in the latest period.
Cash-flow-statement-based Accruals Ratio
The accruals ratio mirrors the behavior of aggregate accruals with marked variability. It starts relatively high at 19.76% in 2020, decreases notably to 5.08% in 2021, then spikes to 56.84% in 2022. The ratio reaches a low point of 0.89% in 2023 before surging to 98.99% in 2024. This pattern indicates significant changes in the relationship between accruals and cash flow over time, peaking overwhelmingly in the most recent period.