Accruals Ratio
factor.formula
Accruals Ratio:
Accruals calculation formula:
in,
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Accrued earnings accumulated over the trailing twelve months (TTM). Accrued earnings are calculated by deducting net cash flow from operating activities from net income, reflecting the impact of non-cash income and expenses on earnings.
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The accumulated net profit for the last 12 months (Trailing Twelve Months, TTM). Net profit is the final profit of a company after deducting all costs and expenses in a period of time.
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The net cash flow from operating activities accumulated in the last 12 months (Trailing Twelve Months, TTM). This indicator reflects the net cash inflow and outflow generated by the company in normal operating activities and is an important indicator to measure the company's true profitability.
factor.explanation
The Accruals Ratio reflects the proportion of accruals (non-cash) in a company's profits. This indicator helps investors and analysts identify whether a company relies too much on accruals to boost profits. A higher ratio may indicate lower profit quality, as accruals may be subject to greater subjective judgment and manipulation, which may hide potential financial risks. A lower accruals ratio is generally considered a symbol of better profit quality, as it indicates that a company's profits are more derived from real cash inflows rather than non-cash accounting treatments. This indicator helps identify companies that may have profit quality problems, thereby reducing investment risks.