Accrual Ratio (Balance Sheet) = (NOA - NOA previous year) / ((NOA + NOA previous year) / 2)
NOA = Net operating assets = (Total assets – Cash) - (Total liabilities – Total debt)
The change in Net Operating Assets
The ratio shows you the change in net operating assets, compared to the average net operating assets over the past two years.
What to be careful of
Thus an increase in sales and or earnings accompanied by an increase in the Accrual Ratio (Balance Sheet) should raise a red flag as it may mean that cash for the sales were not received.
You should also be careful of a higher than industry-average growth rate in sales and, or profitability with a higher than industry-average accruals ratio.
How to use the ratio
Available as a screening ratio: Yes
Available as an output column ratio: Yes
How to select the companies with the lowest Accrual Ratio (Balance Sheet)
To find companies with the lowest Accrual Ratio (Balance Sheet) set the slider from 80% to 100%.