Sloan accruals ratio
What it measures¶
Accruals are the part of profit that is not cash — a sale booked before the customer pays, a cost recorded before it is paid. The Sloan accruals ratio measures them as (net income − operating cash flow) ÷ average total assets. A positive ratio means profit ran ahead of cash; a negative one, cash ran ahead of profit.
Why it is on the page¶
It opens the earnings-quality panel because it is the cheapest and least model-dependent question about a profit: did it turn into cash? Richard Sloan found in 1996 that profits made largely of accruals tended to fall back in later years. The same ratio is the condition summary's Accruals check.
Thresholds, their source and the population they were fitted on¶
The row's bar has three zones:
| Zone | Ratio |
|---|---|
| below −10% | cash far ahead of profit |
| within ±10% | unremarkable |
| above +10% | profit far ahead of cash |
- Source: Sloan (1996); the ±10% band is a practitioners' line — Sloan ranked companies into tenths and set no cut-off.
- Fitted on: US companies, 1962–1991. Later work found the market effect weaker in recent US data.
- Evidence grade: peer-reviewed and replicated (the measure); practitioner convention (the band).
A worked example¶
Celestica, as the Fundamentals page showed it on 9 August 2026 (fiscal year 2025): 2.62% — inside the band; its profit was largely backed by cash.
What “No verdict” means here¶
The row carries no verdict of its own; the panel header shows the verdict of Earnings quality & red flags. It reads insufficient data when net income, operating cash flow or either year-end's total assets is not stored.
What the verdict is and is not¶
The figure describes how far one year's profit and cash diverged. Outside the band is a reason to read the cash-flow statement, not a finding of anything improper. It is not a forecast and not an instruction to trade the shares.