Accrual Ratio (CF)

Accrual  Ratio CF (Cash Flow)= (Net profit – Cash flow from Operating  Activities - Adjusted cash flow from Investment Activities) / (Average Net Operating Assets)

Average Net Operating Assets = Total Assets - Cash - Total Liabilities - Total Debt

 

More negative is better

The best companies are those with biggest negative Accrual Ratio CF value. This is because of depreciation (a non cash expense) which is deducted to get to Net profit but added back to get Cash Flow from Operating Activities.

 

How to select the best 20% Accrual Ratio (CF) companies

To get the 20% of companies with the best Accrual Ratio CF (lowest accruals) set the slider from 100% to 80%.

Important! This setting is different to most other settings where you normally set the slider from 0% to 20% to select the best companies.

 

Use it for the Millenial Money strategy

Even though this ratio is not the exact same ratio you can use it to implement The Millenial Money investment strategy mentioned in his great book by Patrick O'shaughnessy.

 

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