Evaluate the Quality of Earnings with Accrual Analysis
The accrual ratio is a key financial metric that helps you assess the quality of a company's earnings by comparing net income to operating cash flow. A higher accrual ratio may indicate earnings manipulation or lower earnings quality. Use this calculator to analyze accruals using standard or alternative formulas.
See how the accrual ratio is calculated in real-world scenarios.
A company reports net income of $120,000, operating cash flow of $95,000, and total assets of $500,000.
Net Income: 120000
Operating Cash Flow: 95000
Total Assets: 500000
Calculation Method: Standard (Net Income & Operating Cash Flow)
Net income is $80,000, operating cash flow is $70,000, and average total assets are $400,000.
Net Income: 80000
Operating Cash Flow: 70000
Average Total Assets: 400000
Calculation Method: Standard (Net Income & Operating Cash Flow)
Change in working capital is $15,000, depreciation & amortization is $10,000, and total assets are $300,000.
Change in Working Capital: 15000
Depreciation & Amortization: 10000
Total Assets: 300000
Calculation Method: Alternative (Working Capital & Depreciation)
Change in working capital is $20,000, depreciation & amortization is $8,000, and average total assets are $350,000.
Change in Working Capital: 20000
Depreciation & Amortization: 8000
Average Total Assets: 350000
Calculation Method: Alternative (Working Capital & Depreciation)