Stock Analysis on Net
Stock Analysis on Net

Workday Inc. (NASDAQ:WDAY)

$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

Workday Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Jan 31, 2025 Jan 31, 2024 Jan 31, 2023 Jan 31, 2022 Jan 31, 2021 Jan 31, 2020
Operating Assets
Total assets
Less: Cash and cash equivalents
Less: Marketable securities
Operating assets
Operating Liabilities
Total liabilities
Less: Debt, current
Less: Debt, noncurrent
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.
Balance-Sheet-Based Accruals Ratio, Sector
Software & Services
Balance-Sheet-Based Accruals Ratio, Industry
Information Technology

Based on: 10-K (reporting date: 2025-01-31), 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).

1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =

2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= – =

3 2025 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 an overall increasing trend from 1,537 million US dollars in 2021 to 4,001 million US dollars projected for 2025. Despite a slight decrease observed in 2023, the general trajectory is upward, indicating growing operational asset utilization over the five-year period.
Balance-sheet-based Aggregate Accruals
The aggregate accruals show significant volatility throughout the period. Starting with a negative value of -267 million US dollars in 2021, there is a sharp increase to 1,194 million in 2022, followed by a decline to -291 million in 2023. The values then rise again to 809 million in 2024 and slightly decrease to 752 million in 2025. This fluctuation suggests inconsistent accrual accounting adjustments or variations in working capital components year-over-year.
Balance-sheet-based Accruals Ratio
The accruals ratio, expressed as a percentage of net operating assets, similarly exhibits pronounced volatility. Initially negative at -15.99% in 2021, it spikes to a high of 55.93% in 2022, falls to -11.24% in 2023, and settles at positive values of 28.44% and 20.74% in 2024 and 2025 respectively. These shifts reflect substantial changes in accrual accounting relative to the scale of net operating assets, indicating periods of significant accrual activity and potential variability in earnings quality.

Cash-Flow-Statement-Based Accruals Ratio

Workday Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Jan 31, 2025 Jan 31, 2024 Jan 31, 2023 Jan 31, 2022 Jan 31, 2021 Jan 31, 2020
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.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Software & Services
Cash-Flow-Statement-Based Accruals Ratio, Industry
Information Technology

Based on: 10-K (reporting date: 2025-01-31), 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).

1 2025 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 demonstrated a consistent upward trend over the five-year period. Starting from US$1,537 million in the year ending January 31, 2021, the figure increased significantly to US$2,731 million by the end of January 31, 2022. Although there was a slight decline in January 2023 to US$2,440 million, the value rose sharply in the subsequent years, reaching US$3,249 million in 2024 and US$4,001 million by January 31, 2025. This trend suggests an overall expansion in the company’s operating asset base, indicating growth in operational capacity or investment.
Cash-Flow-Statement-Based Aggregate Accruals
The aggregate accruals exhibited notable volatility during the period. Initially, there was a negative value of -US$309 million in 2021, implying that cash flows exceeded accounting earnings for that year. This value improved substantially by 2022, approaching zero at -US$14 million. However, a reversal occurred in the following years, with positive accruals soaring to US$482 million in 2023 and further increasing to US$983 million in 2024. This upward surge indicates that accounting profits increasingly outpaced cash flows in these years. In 2025, the accruals swung back to a negative figure of -US$154 million, potentially reflecting a correction or change in earnings quality. Overall, this pattern reflects an irregular relationship between earnings and actual cash flow generation, with some periods of potential earnings management or timing differences.
Cash-Flow-Statement-Based Accruals Ratio
The accruals ratio, expressed as a percentage of net operating assets, mirrored the volatility of aggregate accruals. It commenced at -18.51% in 2021, indicating that cash outflows exceeded earnings to a significant degree relative to the asset base. This ratio improved markedly to -0.65% in 2022 but then turned positive in 2023 at 18.64%, further increasing to 34.56% in 2024. These positive values suggest a decoupling of earnings from cash flows, which might imply reduced earnings quality or increased accrual adjustments during those years. Notably, the ratio reverted to a negative figure of -4.25% in 2025, signaling a return to a more conservative or cash-aligned earnings profile. The large swings in this ratio point to considerable fluctuations in the quality and sustainability of reported earnings over time.