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
- Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Enterprise Value (EV)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2008
- Current Ratio since 2008
- Price to Book Value (P/BV) since 2008
- Analysis of Debt
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Balance-Sheet-Based Accruals Ratio
Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | ||
---|---|---|---|---|---|---|---|
Operating Assets | |||||||
Total assets | |||||||
Less: Cash and cash equivalents | |||||||
Less: Restricted cash equivalents, U.S. litigation escrow | |||||||
Less: Investment securities | |||||||
Less: Customer collateral | |||||||
Operating assets | |||||||
Operating Liabilities | |||||||
Total liabilities | |||||||
Less: Current maturities of debt | |||||||
Less: Long-term debt, excluding current maturities | |||||||
Operating liabilities | |||||||
Net operating assets1 | |||||||
Balance-sheet-based aggregate accruals2 | |||||||
Financial Ratio | |||||||
Balance-sheet-based accruals ratio3 | |||||||
Benchmarks | |||||||
Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
Accenture PLC | |||||||
Adobe Inc. | |||||||
Cadence Design Systems Inc. | |||||||
CrowdStrike Holdings Inc. | |||||||
Fair Isaac Corp. | |||||||
International Business Machines Corp. | |||||||
Intuit Inc. | |||||||
Microsoft Corp. | |||||||
Oracle Corp. | |||||||
Palantir Technologies Inc. | |||||||
Palo Alto Networks Inc. | |||||||
Salesforce Inc. | |||||||
ServiceNow Inc. | |||||||
Synopsys Inc. | |||||||
Workday Inc. | |||||||
Balance-Sheet-Based Accruals Ratio, Sector | |||||||
Software & Services | |||||||
Balance-Sheet-Based Accruals Ratio, Industry | |||||||
Information Technology |
Based on: 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30).
1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= – =
3 2022 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 financial reporting quality measures reveals notable trends in the company's net operating assets and accruals over the examined five-year period.
- Net Operating Assets
- The net operating assets demonstrate a relatively stable pattern with minor fluctuations. Starting at approximately 36,112 million US dollars in 2018, the value slightly increased to peak at 37,488 million in 2020, before gradually declining to 35,718 million by 2022. This pattern indicates moderate variations without extreme volatility, suggesting a consistent asset base over the years.
- Balance-sheet-based Aggregate Accruals
- The aggregate accruals exhibit a more volatile trend. Initial figures show a decrease from 560 million US dollars in 2018 to 374 million in 2019, followed by a sharp increase to 1,002 million in 2020. Subsequently, there is a notable reversal with negative accruals recorded in 2021 (-588 million) and a further decline in 2022 (-1,182 million), indicating potential shifts in accrual accounting or operational conditions affecting these values.
- Balance-sheet-based Accruals Ratio
- The accruals ratio aligns with the movement seen in aggregate accruals but expressed as a percentage relative to net operating assets. The ratio declines from 1.56% in 2018 to 1.03% in 2019, then spikes to 2.71% in 2020, indicating increased accruals relative to assets. Post-2020, there is a significant negative turnaround in the ratio, dropping to -1.58% in 2021 and further to -3.26% in 2022, implying a considerable proportion of negative accruals compared to the asset base.
Overall, the data suggest that while the net operating asset base remains fairly consistent, the accruals and their proportion relative to assets have undergone substantial fluctuations, notably transitioning from positive to negative values in the latter years. Such shifts may reflect changes in earnings quality, accounting policies, or operational challenges impacting accrual-based earnings components during the period analyzed.
Cash-Flow-Statement-Based Accruals Ratio
Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | ||
---|---|---|---|---|---|---|---|
Net income | |||||||
Less: Net cash provided by operating activities | |||||||
Less: Net cash (used in) provided by investing activities | |||||||
Cash-flow-statement-based aggregate accruals | |||||||
Financial Ratio | |||||||
Cash-flow-statement-based accruals ratio1 | |||||||
Benchmarks | |||||||
Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
Accenture PLC | |||||||
Adobe Inc. | |||||||
Cadence Design Systems Inc. | |||||||
CrowdStrike Holdings Inc. | |||||||
Fair Isaac Corp. | |||||||
International Business Machines Corp. | |||||||
Intuit Inc. | |||||||
Microsoft Corp. | |||||||
Oracle Corp. | |||||||
Palantir Technologies Inc. | |||||||
Palo Alto Networks Inc. | |||||||
Salesforce Inc. | |||||||
ServiceNow Inc. | |||||||
Synopsys Inc. | |||||||
Workday Inc. | |||||||
Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
Software & Services | |||||||
Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
Information Technology |
Based on: 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30).
1 2022 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 experienced a generally stable trend between 2018 and 2022, fluctuating within a narrow range. Starting at approximately 36,112 million US dollars in 2018, the figure slightly increased to 36,486 million in 2019, then further rose to 37,488 million in 2020, before marginally declining to 36,900 million in 2021 and 35,718 million in 2022. Overall, this reflects minor variability with no significant upward or downward trend, indicating stable asset management over the period.
- Cash-flow-statement-based aggregate accruals
- The aggregate accruals demonstrated considerable volatility over the five-year span. Beginning with a positive value of 672 million US dollars in 2018, the figure shifted to negative territory in subsequent years with -113 million in 2019 and a pronounced decline to -1,001 million in 2020. This downward trajectory intensified in 2021, reaching -2,764 million, before rebounding substantially to a positive 396 million in 2022. This pattern suggests fluctuating accounting adjustments affecting earnings quality, with a notable improvement in the final year.
- Cash-flow-statement-based accruals ratio
- The accruals ratio mirrored the trends observed in aggregate accruals, moving from a moderate positive 1.88% in 2018 to a negative range over the following years: -0.31% in 2019, -2.71% in 2020, and -7.43% in 2021. The steep negative value in 2021 implies a significant deviation of accruals from cash flows, potentially signaling lower quality of earnings for that year. However, this measure improved sharply in 2022, returning to a positive 1.09%, indicating a restoration towards a more balanced relationship between accruals and cash flows and possibly enhanced financial reporting quality.