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Microsoft Excel LibreOffice Calc


Financial Reporting Quality: Aggregate Accruals

Difficulty: Advanced

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

FedEx Corp., balance sheet computation of aggregate accruals

USD $ in millions

Microsoft Excel LibreOffice Calc
May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014 May 31, 2013
Operating Assets
Total assets hidden hidden hidden hidden hidden hidden
Less: Cash and cash equivalents hidden hidden hidden hidden hidden hidden
Operating assets hidden hidden hidden hidden hidden hidden
Operating Liabilities
Total liabilities hidden hidden hidden hidden hidden hidden
Less: Current portion of long-term debt hidden hidden hidden hidden hidden hidden
Less: Long-term debt, less current portion hidden hidden hidden hidden hidden hidden
Operating liabilities hidden hidden hidden hidden hidden hidden
Net operating assets1 hidden hidden hidden hidden hidden hidden
Balance-sheet-based aggregate accruals2 hidden hidden hidden hidden hidden hidden
Ratio
Balance-sheet-based accruals ratio3 hidden% hidden% hidden% hidden% hidden% hidden%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors
Union Pacific Corp. hidden% hidden% hidden% hidden% hidden% hidden%
United Parcel Service Inc. hidden% hidden% hidden% hidden% hidden% hidden%
Balance-Sheet-Based Accruals Ratio, Sector
Industrial Transportation hidden% hidden% hidden% hidden% hidden% hidden%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials hidden% hidden% hidden% hidden% hidden% hidden%

2018 Calculations

1 Net operating assets = Operating assets – Operating liabilities
= hiddenhidden = hidden

2 Balance-sheet-based aggregate accruals = Net operating assets 2018 – Net operating assets 2017
= hiddenhidden = hidden

3 Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × hidden ÷ [(hidden + hidden) ÷ 2] = hidden%

Ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, FedEx Corp. deteriorated earnings quality from 2017 to 2018.

Cash-Flow-Statement-Based Accruals Ratio

FedEx Corp., cash flow statement computation of aggregate accruals

USD $ in millions

Microsoft Excel LibreOffice Calc
May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014 May 31, 2013
Net income hidden hidden hidden hidden hidden hidden
Less: Cash provided by operating activities hidden hidden hidden hidden hidden hidden
Less: Cash used in investing activities hidden hidden hidden hidden hidden hidden
Cash-flow-statement-based aggregate accruals hidden hidden hidden hidden hidden hidden
Ratio
Cash-flow-statement-based accruals ratio1 hidden% hidden% hidden% hidden% hidden% hidden%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors
Union Pacific Corp. hidden% hidden% hidden% hidden% hidden% hidden%
United Parcel Service Inc. hidden% hidden% hidden% hidden% hidden% hidden%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Industrial Transportation hidden% hidden% hidden% hidden% hidden% hidden%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials hidden% hidden% hidden% hidden% hidden% hidden%

2018 Calculations

1 Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × hidden ÷ [(hidden + hidden) ÷ 2] = hidden%

Ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, FedEx Corp. deteriorated earnings quality from 2017 to 2018.