Stock Analysis on Net

Medtronic PLC (NYSE:MDT)

$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

Medtronic PLC, balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Apr 25, 2025 Apr 26, 2024 Apr 28, 2023 Apr 29, 2022 Apr 30, 2021 Apr 24, 2020
Operating Assets
Total assets
Less: Cash and cash equivalents
Less: Investments
Operating assets
Operating Liabilities
Total liabilities
Less: Current debt obligations
Less: Long-term debt
Operating liabilities
 
Net operating assets1
Balance-sheet-based aggregate accruals2
Financial Ratio
Balance-sheet-based accruals ratio3
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Abbott Laboratories
CVS Health Corp.
Elevance Health Inc.
Intuitive Surgical Inc.
UnitedHealth Group Inc.
Balance-Sheet-Based Accruals Ratio, Sector
Health Care Equipment & Services
Balance-Sheet-Based Accruals Ratio, Industry
Health Care

Based on: 10-K (reporting date: 2025-04-25), 10-K (reporting date: 2024-04-26), 10-K (reporting date: 2023-04-28), 10-K (reporting date: 2022-04-29), 10-K (reporting date: 2021-04-30), 10-K (reporting date: 2020-04-24).

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 financial data indicates several noteworthy trends and fluctuations in the quality metrics over the five-year period.

Net Operating Assets
The net operating assets exhibited minor volatility throughout the assessed periods, ranging from a low of 66,262 million US dollars in April 2022 to a peak of 68,070 million US dollars in April 2023. Despite these fluctuations, the values remained relatively stable, ending at 67,807 million US dollars in April 2025, slightly above the base year level of 67,174 million US dollars in April 2021. This stability suggests a consistent scale of operational asset investment over time.
Balance-sheet-based Aggregate Accruals
A more pronounced variability is visible in the aggregate accruals data. The measure shifted significantly from a positive 2,453 million US dollars in April 2021 to a negative value of -912 million in April 2022. It then rebounded to a positive 1,808 million in April 2023, followed again by a negative figure of -631 million in April 2024, before returning to a positive 368 million in April 2025. These alternating positive and negative values signify irregularities in accrual accounting components, highlighting changes in non-cash expense recognition or timing differences in revenue and cost recording.
Balance-sheet-based Accruals Ratio
The accruals ratio, expressing aggregate accruals as a percentage of net operating assets, mirrors the fluctuations observed in the aggregate accruals data. It decreased from 3.72% in April 2021 to -1.37% in April 2022, then increased to 2.69% in April 2023, dropped again to -0.93% in April 2024, and ended at 0.54% in April 2025. The oscillation between positive and negative values suggests variations in earnings quality and the timing of income recognition, which may impact the predictability and sustainability of reported earnings.

Overall, while the net operating assets remained largely steady, the pattern of accruals indicates episodic shifts in financial reporting quality measures, with a tendency toward moderate volatility in accrual components over the observed periods.


Cash-Flow-Statement-Based Accruals Ratio

Medtronic PLC, cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Apr 25, 2025 Apr 26, 2024 Apr 28, 2023 Apr 29, 2022 Apr 30, 2021 Apr 24, 2020
Net income attributable to Medtronic
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
Abbott Laboratories
CVS Health Corp.
Elevance Health Inc.
Intuitive Surgical Inc.
UnitedHealth Group Inc.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Health Care Equipment & Services
Cash-Flow-Statement-Based Accruals Ratio, Industry
Health Care

Based on: 10-K (reporting date: 2025-04-25), 10-K (reporting date: 2024-04-26), 10-K (reporting date: 2023-04-28), 10-K (reporting date: 2022-04-29), 10-K (reporting date: 2021-04-30), 10-K (reporting date: 2020-04-24).

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.


The analysis of the annual financial reporting quality measures over a five-year period reveals notable fluctuations and trends in net operating assets, cash-flow-statement-based aggregate accruals, and the corresponding accruals ratio.

Net Operating Assets
The net operating assets demonstrate relative stability with minor fluctuations. Beginning at approximately 67,174 million US dollars in the first observed period, the figure slightly decreased to 66,262 million in the following year. Subsequently, there was an increase to 68,070 million, followed by a modest decline in the next year to 67,439 million. The final period shows a slight rise to 67,807 million. Overall, net operating assets have remained within a narrow range, indicating consistency in the operational asset base over time.
Cash-flow-statement-based Aggregate Accruals
This measure shows considerable volatility across the periods. The initial positive figure of 232 million US dollars transitioned sharply into a negative value of -648 million in the second period. The third period recorded a substantial increase to 1,212 million, followed by two consecutive negative values of -745 million and -445 million in the fourth and fifth periods respectively. This pattern highlights inconsistent accrual activities, with alternating periods of high positive and significant negative accruals, potentially reflecting fluctuating earnings quality or timing differences in revenue and expense recognition.
Cash-flow-statement-based Accruals Ratio
The accruals ratio reflects a similar volatility. Starting at a modest positive 0.35%, it declined sharply to -0.97% in the next year. The ratio then surged to 1.8%, indicating a notable gain in accruals relative to net operating assets. However, this was followed by two negative ratios of -1.1% and -0.66% in the final two periods. These fluctuations suggest variability in the quality of earnings and indicate potential challenges in consistent earnings recognition or operational cash flow alignment.

In summary, while net operating assets exhibit stability, the measures related to accruals and accrual ratios reveal significant volatility. Such inconsistency in accruals may warrant further examination to understand the underlying causes, including the impact on reported earnings quality and potential implications for financial statement users.