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.
Balance-Sheet-Based Accruals Ratio
Dell Technologies Inc., balance sheet computation of aggregate accruals
US$ in millions
| Jan 31, 2025 | Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | Jan 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 79,746) | 82,089) | 89,611) | 92,735) | 123,415) | 118,861) | |
| Less: Cash and cash equivalents | 3,633) | 7,366) | 8,607) | 9,477) | 14,201) | 9,302) | |
| Operating assets | 76,113) | 74,723) | 81,004) | 83,258) | 109,214) | 109,559) | |
| Operating Liabilities | |||||||
| Total liabilities | 81,133) | 84,398) | 92,636) | 94,315) | 115,390) | 115,077) | |
| Less: Short-term debt | 5,204) | 6,982) | 6,573) | 5,823) | 6,362) | 7,737) | |
| Less: Long-term debt | 19,363) | 19,012) | 23,015) | 21,131) | 41,622) | 44,319) | |
| Operating liabilities | 56,566) | 58,404) | 63,048) | 67,361) | 67,406) | 63,021) | |
| Net operating assets1 | 19,547) | 16,319) | 17,956) | 15,897) | 41,808) | 46,538) | |
| Balance-sheet-based aggregate accruals2 | 3,228) | (1,637) | 2,059) | (25,911) | (4,730) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | 18.00% | -9.55% | 12.16% | -89.81% | -10.71% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Apple Inc. | — | -12.64% | -9.04% | -2.12% | 36.09% | -11.31% | |
| Arista Networks Inc. | — | -26.64% | 17.14% | 106.22% | 24.14% | — | |
| Cisco Systems Inc. | — | 75.07% | -12.09% | 5.96% | 20.24% | -7.26% | |
| Super Micro Computer Inc. | — | 105.88% | 3.74% | 58.35% | 8.42% | 20.97% | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Technology Hardware & Equipment | 0.00% | 11.96% | -6.96% | -13.35% | 22.01% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 21.41% | 8.97% | 18.09% | 19.19% | — | |
Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= 76,113 – 56,566 = 19,547
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 19,547 – 16,319 = 3,228
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 3,228 ÷ [(19,547 + 16,319) ÷ 2] = 18.00%
4 Click competitor name to see calculations.
- Net Operating Assets
- The net operating assets show a significant decrease from 41,808 million US dollars in January 2021 to 15,897 million US dollars in January 2022. This is followed by a moderate increase to 17,956 million in February 2023, a slight decrease to 16,319 million in February 2024, and then another increase to 19,547 million in January 2025. Overall, there is a notable downward shift in the initial year, after which the values fluctuate with a slight upward trend towards the end of the period.
- Balance-sheet-based Aggregate Accruals
- The aggregate accruals reveal a sharp decline from -4,730 million dollars in January 2021 to a much larger negative value of -25,911 million in January 2022. This steep negative movement reverses dramatically in February 2023, where accruals turn positive to 2,059 million. Following that, there is a negative adjustment to -1,637 million in February 2024, again flipping back to positive 3,228 million by January 2025. This pattern indicates significant volatility in accruals over the five-year span.
- Balance-sheet-based Accruals Ratio
- Mirroring the aggregate accruals, the accruals ratio shows a decrease from -10.71% in January 2021 to a sharply negative -89.81% in January 2022. It then shifts to a positive 12.16% in February 2023, dips back to -9.55% in February 2024, and finally climbs to 18% in January 2025. The ratio demonstrates considerable variability, fluctuating between negative and positive extremes, which reflects inconsistent accruals relative to net operating assets during the period.
Cash-Flow-Statement-Based Accruals Ratio
Dell Technologies Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Jan 31, 2025 | Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | Jan 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Net income attributable to Dell Technologies Inc. | 4,592) | 3,211) | 2,442) | 5,563) | 3,250) | 4,616) | |
| Less: Change in cash from operating activities | 4,521) | 8,676) | 3,565) | 10,307) | 11,407) | 9,291) | |
| Less: Change in cash from investing activities | (2,215) | (2,783) | (3,024) | 1,306) | (460) | (4,686) | |
| Cash-flow-statement-based aggregate accruals | 2,286) | (2,682) | 1,901) | (6,050) | (7,697) | 11) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | 12.75% | -15.65% | 11.23% | -20.97% | -17.42% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Apple Inc. | — | -25.90% | -14.62% | 0.00% | 4.86% | -20.46% | |
| Arista Networks Inc. | — | 82.06% | 36.37% | 52.90% | 147.50% | — | |
| Cisco Systems Inc. | — | 46.78% | -7.65% | -10.18% | 1.64% | -32.20% | |
| Super Micro Computer Inc. | — | 98.99% | 0.89% | 56.84% | 5.08% | 19.76% | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Technology Hardware & Equipment | 0.00% | -2.79% | -10.03% | -4.10% | -0.72% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 6.30% | 1.47% | 2.90% | 8.62% | — | |
Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 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 × 2,286 ÷ [(19,547 + 16,319) ÷ 2] = 12.75%
2 Click competitor name to see calculations.
- Net operating assets
- The net operating assets demonstrate a significant decline from 41,808 million USD in early 2021 to 15,897 million USD in early 2022, representing a sharp reduction. Following this decrease, there is a slight recovery in 2023 and 2024, with values of 17,956 million USD and 16,319 million USD respectively. The figure increases again to 19,547 million USD in early 2025. Overall, the trend indicates a substantial decrease in net operating assets in the initial period, followed by modest fluctuations and gradual recovery towards the latter periods.
- Cash-flow-statement-based aggregate accruals
- The aggregate accruals show a negative value initially at -7,697 million USD in 2021, improving somewhat to -6,050 million USD in 2022. However, there is a notable shift in 2023 where the accruals become positive, reaching 1,901 million USD. This positive trend is interrupted in 2024, with accruals again falling negative to -2,682 million USD, only to rebound positively to 2,286 million USD in 2025. This pattern reflects volatility in accruals, with alternating periods of negative and positive values indicating fluctuations in earnings quality or timing differences between cash flows and accounting earnings.
- Cash-flow-statement-based accruals ratio
- The accruals ratio mirrors the pattern found in aggregate accruals. It starts at -17.42% in 2021, declining further to -20.97% in 2022, showing an increasing proportion of negative accruals relative to cash flows. In 2023, the ratio shifts strongly positive to 11.23%, indicating a period where accruals contribute positively. This is followed by another decline to -15.65% in 2024, before rising again to 12.75% in 2025. These oscillations suggest inconsistency in the accruals component relative to operating cash flows, potentially pointing to fluctuating earnings management or operational cash flow timing effects.