Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Home Depot Inc. (NYSE:HD)

Financial Reporting Quality: Aggregate Accruals

Advanced level

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

Home Depot Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Feb 2, 2020 Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015
Operating Assets
Total assets 51,236  44,003  44,529  42,966  42,549  39,946 
Less: Cash and cash equivalents 2,133  1,778  3,595  2,538  2,216  1,723 
Operating assets 49,103  42,225  40,934  40,428  40,333  38,223 
Operating Liabilities
Total liabilities 54,352  45,881  43,075  38,633  36,233  30,624 
Less: Short-term debt 974  1,339  1,559  710  350  290 
Less: Current installments of long-term debt 1,839  1,056  1,202  542  77  38 
Less: Long-term debt, excluding current installments 28,670  26,807  24,267  22,349  20,888  16,869 
Operating liabilities 22,869  16,679  16,047  15,032  14,918  13,427 
 
Net operating assets1 26,234  25,546  24,887  25,396  25,415  24,796 
Balance-sheet-based aggregate accruals2 688  659  (509) (19) 619 
Financial Ratio
Balance-sheet-based accruals ratio3 2.66% 2.61% -2.02% -0.07% 2.47%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Amazon.com Inc. 27.51% 21.63% 105.22% 18.05%
Costco Wholesale Corp. 0.35% 4.27% 3.79% -6.51% 18.80%
Dollar General Corp. 3.56% 2.04% 5.02% 2.88% 3.98%
Lowe’s Cos. Inc. 6.39% -14.72% 3.22% 9.18% -5.72%
Target Corp. -1.25% 1.74% -2.57% -2.24% -12.59%
TJX Cos. Inc. 15.53% 3.29% 23.01% -6.47% 11.27%
Walmart Inc. -2.64% 7.50% 0.79% -4.36% -1.78%
Balance-Sheet-Based Accruals Ratio, Sector
General Retailers 0.00% 8.33% 4.37% 8.42% -0.42%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Services 0.00% 11.38% 16.70% 8.30% 14.77%

Based on: 10-K (filing date: 2020-03-25), 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26).

1 2020 Calculation
Net operating assets = Operating assets – Operating liabilities
= 49,10322,869 = 26,234

2 2020 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2020 – Net operating assets2019
= 26,23425,546 = 688

3 2020 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 688 ÷ [(26,234 + 25,546) ÷ 2] = 2.66%

4 Click competitor name to see calculations.

Financial 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, Home Depot Inc. deteriorated earnings quality from 2019 to 2020.

Cash-Flow-Statement-Based Accruals Ratio

Home Depot Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Feb 2, 2020 Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015
Net earnings 11,242  11,121  8,630  7,957  7,009  6,345 
Less: Net cash provided by operating activities 13,723  13,038  12,031  9,783  9,373  8,242 
Less: Net cash used in investing activities (2,653) (2,416) (2,228) (1,583) (2,982) (1,271)
Cash-flow-statement-based aggregate accruals 172  499  (1,173) (243) 618  (626)
Financial Ratio
Cash-flow-statement-based accruals ratio1 0.66% 1.98% -4.67% -0.96% 2.46%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Amazon.com Inc. -5.12% -20.61% 52.87% -41.10%
Costco Wholesale Corp. -7.45% 1.32% 2.52% -13.60% 12.02%
Dollar General Corp. 2.79% 1.98% 4.42% 2.37% 3.62%
Lowe’s Cos. Inc. 6.85% -13.55% -0.81% 4.08% -4.44%
Target Corp. -4.18% 1.84% -4.02% -5.22% -9.80%
TJX Cos. Inc. 14.48% -9.68% 16.13% -2.63% 12.23%
Walmart Inc. -0.97% 2.36% -7.84% -3.19% -1.60%
Cash-Flow-Statement-Based Accruals Ratio, Sector
General Retailers 0.00% -0.62% -7.36% 2.71% -2.93%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Services 0.00% 1.61% 7.22% 5.01% 1.86%

Based on: 10-K (filing date: 2020-03-25), 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26).

1 2020 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 172 ÷ [(26,234 + 25,546) ÷ 2] = 0.66%

2 Click competitor name to see calculations.

Financial 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, Home Depot Inc. improved earnings quality from 2019 to 2020.