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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- Income Statement
- Statement of Comprehensive Income
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Enterprise Value (EV)
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
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Balance-Sheet-Based Accruals Ratio
FedEx Corp., balance sheet computation of aggregate accruals
US$ in millions
| May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | |||||||
| Less: Cash and cash equivalents | |||||||
| Operating assets | |||||||
| Operating Liabilities | |||||||
| Total liabilities | |||||||
| Less: Current portion of long-term debt | |||||||
| Less: Long-term debt, less current portion | |||||||
| Operating liabilities | |||||||
| Net operating assets1 | |||||||
| Balance-sheet-based aggregate accruals2 | |||||||
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | |||||||
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Uber Technologies Inc. | |||||||
| Union Pacific Corp. | |||||||
| United Airlines Holdings Inc. | |||||||
| United Parcel Service Inc. | |||||||
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Transportation | |||||||
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Industrials | |||||||
Based on: 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31).
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.
The analysis of the annual financial reporting quality measures reveals several trends in the examined financial metrics over the five-year period.
- Net Operating Assets
- There is a consistent upward trend in net operating assets from 37,960 million US dollars in 2021 to 43,151 million US dollars in 2025. This steady increase indicates expansion in the company's asset base used in operations, with the most significant growth observed between 2024 and 2025.
- Balance-Sheet-Based Aggregate Accruals
- The aggregate accruals demonstrate variability across the five years. Initially, there is a substantial decline from 2,543 million US dollars in 2021 to 346 million in 2022, suggesting a reduction in accruals in that period. Afterwards, the value increases again to 1,505 million in 2023 and slightly decreases to 1,473 million in 2024, followed by another increase to 1,867 million in 2025. This fluctuation indicates changing levels of non-cash components affecting operating performance throughout the period.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio as a percentage reflects a similar pattern of fluctuations. It sharply decreases from 6.93% in 2021 to 0.91% in 2022, suggesting a significant reduction in accruals relative to net operating assets in that year. Subsequently, the ratio increases to 3.85% in 2023, then slightly declines to 3.63% in 2024, and rises again to 4.42% in 2025. These variations imply periods of increasing and decreasing accruals intensity relative to the asset base.
Overall, the data indicates a positive growth trajectory in net operating assets, accompanied by fluctuating levels and ratios of accruals. The variability in accruals may point to changes in earnings quality and financial reporting practices within these years.
Cash-Flow-Statement-Based Accruals Ratio
FedEx Corp., cash flow statement computation of aggregate accruals
US$ in millions
| May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Net income | |||||||
| Less: Cash provided by operating activities | |||||||
| Less: 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 | |||||||
| Uber Technologies Inc. | |||||||
| Union Pacific Corp. | |||||||
| United Airlines Holdings Inc. | |||||||
| United Parcel Service Inc. | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Transportation | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Industrials | |||||||
Based on: 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31).
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 exhibit a steady increase over the observed five-year period, rising from 37,960 million USD in 2021 to 43,151 million USD in 2025. This trend indicates a gradual growth in the company's investment in assets used in operations.
- Cash-flow-statement-based aggregate accruals
- The aggregate accruals show some variability but generally maintain a similar magnitude around the mid-1000 million USD range. After a dip to 810 million USD in 2022, values increased to a peak of 1,298 million USD in 2023, followed by a gradual decline to 1,148 million USD in 2025. This pattern suggests fluctuations in accrual adjustments relative to cash flows over the years.
- Cash-flow-statement-based accruals ratio
- The accruals ratio parallels the movements in aggregate accruals, starting at 3.01% in 2021 and dropping to a low of 2.12% in 2022. It then rises again to 3.32% in 2023 before experiencing a gradual decrease to 2.72% by 2025. This ratio reflects variations in the proportion of accruals relative to net operating assets, indicating some inconsistency in earnings quality but no extreme fluctuations.