Microsoft Excel LibreOffice Calc

TJX Cos. Inc. (TJX)


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

TJX Cos. Inc., balance sheet computation of aggregate accruals

USD $ in thousands

Microsoft Excel LibreOffice Calc
Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014 Feb 2, 2013
Operating Assets
Total assets 14,058,015  12,883,808  11,499,482  11,128,381  10,201,022  9,511,855 
Less: Cash and cash equivalents 2,758,477  2,929,849  2,095,473  2,493,775  2,149,746  1,811,957 
Less: Short-term investments 506,165  543,242  352,313  282,623  294,702  235,853 
Operating assets 10,793,373  9,410,717  9,051,696  8,351,983  7,756,574  7,464,045 
Operating Liabilities
Total liabilities 8,909,706  8,373,209  7,192,407  6,864,151  5,971,129  5,845,918 
Less: Long-term debt 2,230,607  2,227,599  1,624,054  1,623,864  1,274,216  774,552 
Operating liabilities 6,679,099  6,145,610  5,568,353  5,240,287  4,696,913  5,071,366 
Net operating assets1 4,114,274  3,265,107  3,483,343  3,111,696  3,059,661  2,392,679 
Balance-sheet-based aggregate accruals2 849,167  (218,236) 371,647  52,035  666,982 
Ratio
Balance-sheet-based accruals ratio3 23.01% -6.47% 11.27% 1.69% 24.47%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors
Amazon.com Inc. 23.18% 99.50% 20.86% 16.64%
Costco Wholesale Corp. 3.79% -6.51% 18.80% 2.66% 3.67%
eBay Inc. -14.19% -1.10% 52.38% -82.82%
Home Depot Inc. -2.02% -0.07% 2.47% -2.08% -2.97%
Lowe’s Cos. Inc. 3.22% 9.18% -5.72% -4.96% -2.13%
Netflix Inc. 47.69% 50.97% 61.45% 66.11%
Target Corp. -2.57% -2.24% -12.59% -17.57%
Walmart Inc. 0.79% -4.36% -1.78% -3.86% 2.74%
Balance-Sheet-Based Accruals Ratio, Sector
General Retailers 5.74% 9.97% 2.82% -7.62% 200.00%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Services 15.16% 7.57% 15.13% 5.92% 200.00%

Based on: 10-K (filing date: 2018-04-04), 10-K (filing date: 2017-03-28), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-04-01), 10-K (filing date: 2013-04-02).

2018 Calculations

1 Net operating assets = Operating assets – Operating liabilities
= 10,793,3736,679,099 = 4,114,274

2 Balance-sheet-based aggregate accruals = Net operating assets 2018 – Net operating assets 2017
= 4,114,2743,265,107 = 849,167

3 Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 849,167 ÷ [(4,114,274 + 3,265,107) ÷ 2] = 23.01%

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, TJX Cos. Inc. deteriorated earnings quality from 2017 to 2018.

Cash-Flow-Statement-Based Accruals Ratio

TJX Cos. Inc., cash flow statement computation of aggregate accruals

USD $ in thousands

Microsoft Excel LibreOffice Calc
Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014 Feb 2, 2013
Net income 2,607,948  2,298,234  2,277,658  2,215,128  2,137,396  1,906,687 
Less: Net cash provided by operating activities 3,025,624  3,601,894  2,937,343  3,008,369  2,590,329  3,045,614 
Less: Net cash used in investing activities (1,012,736) (1,214,878) (1,063,115) (954,637) (1,035,631) (1,276,848)
Cash-flow-statement-based aggregate accruals 595,060  (88,782) 403,430  161,396  582,698  137,921 
Ratio
Cash-flow-statement-based accruals ratio1 16.13% -2.63% 12.23% 5.23% 21.37%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors
Amazon.com Inc. -17.91% 45.50% -33.79% -47.47%
Costco Wholesale Corp. 2.52% -13.60% 12.02% 5.48% 1.65%
eBay Inc. -26.52% -23.33% 65.87% -3.88%
Home Depot Inc. -4.67% -0.96% 2.46% -2.50% -2.86%
Lowe’s Cos. Inc. -0.81% 4.08% -4.44% -5.37% -2.45%
Netflix Inc. 44.39% 39.94% 48.86% 61.24%
Target Corp. -4.02% -5.22% -9.80% -19.15%
Walmart Inc. -7.84% -3.19% -1.60% -0.83% 3.88%
Cash-Flow-Statement-Based Accruals Ratio, Sector
General Retailers -6.56% 2.26% 0.47% -4.81% -3.54%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Services 6.40% 3.80% 2.82% 3.25% 3.00%

Based on: 10-K (filing date: 2018-04-04), 10-K (filing date: 2017-03-28), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-04-01), 10-K (filing date: 2013-04-02).

2018 Calculations

1 Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 595,060 ÷ [(4,114,274 + 3,265,107) ÷ 2] = 16.13%

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, TJX Cos. Inc. deteriorated earnings quality from 2017 to 2018.