📊 Accrual Ratio Calculator
Calculate accrual ratio
Cash flow from operating activities
How to Use This Calculator
Enter Net Income
Input the net income from the income statement - profit after all expenses and taxes.
Enter Operating Cash Flow
Enter the operating cash flow from the cash flow statement - cash flow from operating activities.
Review Accrual Ratio
See the accrual ratio, accruals (difference between net income and cash flow), and understand earnings quality. Higher accrual ratios may indicate lower earnings quality.
Formula
Accruals = Net Income - Operating Cash Flow
Accrual Ratio = (Accruals / |Operating Cash Flow|) × 100
Example Calculation:
If net income $100,000, operating cash flow $80,000:
• Accruals = $100,000 - $80,000 = $20,000
• Accrual ratio = ($20,000 / $80,000) × 100 = 25%
About Accrual Ratio Calculator
An accrual ratio calculator helps you calculate the accrual ratio, which measures the proportion of earnings that come from accruals rather than cash flow. The accrual ratio is calculated as (Net Income - Operating Cash Flow) / |Operating Cash Flow| × 100. Higher accrual ratios indicate that a larger portion of earnings comes from accruals (non-cash items), which may signal lower earnings quality. This ratio is used in financial analysis to assess earnings quality and detect potential earnings manipulation.
When to Use This Calculator
- Financial Analysis: Assess earnings quality
- Investment Analysis: Analyze company financial health
- Earnings Quality: Detect potential earnings manipulation
- Cash Flow Analysis: Compare net income to cash flow
Understanding Accrual Ratio
- Accruals: Difference between net income and operating cash flow
- Higher Ratio: More earnings from accruals (may indicate lower quality)
- Lower Ratio: More earnings from cash flow (may indicate higher quality)
- Earnings Quality: Lower accrual ratios suggest higher earnings quality
Why Use Our Calculator?
- ✅ Accrual Analysis: Calculate accrual ratio accurately
- ✅ Earnings Quality: Assess earnings quality
- ✅ Financial Analysis: Analyze financial health
- ✅ Investment Analysis: Make informed investment decisions
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is accrual ratio?
Accrual ratio measures the proportion of earnings that come from accruals (non-cash items) rather than cash flow. It's calculated as (Net Income - Operating Cash Flow) / |Operating Cash Flow| × 100. Higher accrual ratios indicate that a larger portion of earnings comes from accruals, which may signal lower earnings quality. Lower accrual ratios suggest that earnings are more backed by cash flow, indicating higher earnings quality.
What's a good accrual ratio?
A lower accrual ratio is generally better, as it indicates that earnings are more backed by cash flow. However, the "good" ratio depends on the industry and business model. Some industries naturally have higher accruals (like manufacturing with inventory). Compare to industry benchmarks and historical trends. Consistently high accrual ratios may indicate earnings quality issues or potential manipulation.
What are accruals?
Accruals are the difference between net income and operating cash flow. They represent non-cash items in earnings, such as accounts receivable, accounts payable, inventory changes, depreciation, and other accounting adjustments. Accruals allow companies to recognize revenue and expenses when earned or incurred, not necessarily when cash is received or paid. High accruals may indicate aggressive accounting or earnings manipulation.
Why is accrual ratio important?
Accrual ratio is important for: (1) Earnings quality assessment - lower ratios suggest higher quality, (2) Financial analysis - helps detect potential earnings manipulation, (3) Investment decisions - assess company financial health, (4) Cash flow analysis - compare earnings to cash flow. Higher accrual ratios may indicate that earnings are less reliable or that the company may have difficulty converting earnings to cash.