Stock Analysis on Net

Cadence Design Systems Inc. (NASDAQ:CDNS)

Financial Reporting Quality: Aggregate Accruals

Microsoft Excel

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

Cadence Design Systems Inc., balance sheet computation of aggregate accruals

US$ in thousands

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 28, 2019
Operating Assets
Total assets 5,669,491 5,137,071 4,386,299 3,950,785 3,357,225
Less: Cash and cash equivalents 1,008,152 882,325 1,088,940 928,432 705,210
Less: Short-term investments 130,359 4,490 5,956 4,452 4,600
Operating assets 4,530,980 4,250,256 3,291,403 3,017,901 2,647,415
Operating Liabilities
Total liabilities 2,265,220 2,391,958 1,645,624 1,457,767 1,254,331
Less: Revolving credit facility 100,000
Less: Current portion of long-term debt 349,285
Less: Long-term debt, excluding current portion 299,771 648,078 347,588 346,793 346,019
Operating liabilities 1,616,164 1,643,880 1,298,036 1,110,974 908,312
 
Net operating assets1 2,914,816 2,606,376 1,993,367 1,906,927 1,739,103
Balance-sheet-based aggregate accruals2 308,440 613,009 86,440 167,824
Financial Ratio
Balance-sheet-based accruals ratio3 11.17% 26.65% 4.43% 9.21%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Accenture PLC 16.32% 21.70% 27.93% 3.73%
Adobe Inc. 1.85% -8.24% 14.14% 8.20% 2.25%
Autodesk Inc. -23.39% 78.69% 151.86% -160.20%
CrowdStrike Holdings Inc.
International Business Machines Corp. 2.42% 1.55% -7.39% -9.64%
Intuit Inc. -1.74% 85.68% 139.73% -1.39%
Microsoft Corp. 22.96% 42.27% 40.52% 14.41%
Oracle Corp. 51.77% 9.90% 5.62% 1.35%
Palo Alto Networks Inc. 137.01% -124.73% 85.21% 69.06%
Salesforce Inc. -2.30% 57.74% 10.87% 65.87%
ServiceNow Inc. 61.79% 12.89% 34.89% 19.95%
Synopsys Inc. 13.85% 5.01% 0.36% 8.40% 7.93%
Balance-Sheet-Based Accruals Ratio, Sector
Software & Services 18.55% 29.45% 17.17% 7.73%
Balance-Sheet-Based Accruals Ratio, Industry
Information Technology 9.07% 21.68% 21.28% 2.85%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).

1 2023 Calculation
Net operating assets = Operating assets – Operating liabilities
= 4,530,9801,616,164 = 2,914,816

2 2023 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2023 – Net operating assets2022
= 2,914,8162,606,376 = 308,440

3 2023 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 308,440 ÷ [(2,914,816 + 2,606,376) ÷ 2] = 11.17%

4 Click competitor name to see calculations.

Financial ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, Cadence Design Systems Inc. improved earnings quality from 2022 to 2023.

Cash-Flow-Statement-Based Accruals Ratio

Cadence Design Systems Inc., cash flow statement computation of aggregate accruals

US$ in thousands

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 28, 2019
Net income 1,041,144 848,952 695,955 590,644 988,979
Less: Net cash provided by operating activities 1,349,176 1,241,894 1,100,958 904,922 729,600
Less: Net cash used for investing activities (412,249) (738,634) (292,954) (292,158) (105,708)
Cash-flow-statement-based aggregate accruals 104,217 345,692 (112,049) (22,120) 365,087
Financial Ratio
Cash-flow-statement-based accruals ratio1 3.78% 15.03% -5.75% -1.21%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Accenture PLC -0.19% 11.87% 11.80% -13.65%
Adobe Inc. -21.73% -19.93% 9.21% -0.48% -9.78%
Autodesk Inc. -72.07% 45.59% 41.27% -223.04%
CrowdStrike Holdings Inc.
International Business Machines Corp. 0.99% -7.22% -1.64% -13.41%
Intuit Inc. -8.74% 25.60% 58.72% -34.22%
Microsoft Corp. 5.22% 13.42% 17.68% -8.19%
Oracle Corp. 42.79% -30.58% 25.81% -31.35%
Palo Alto Networks Inc. -37.95% -196.64% -68.30% -488.47%
Salesforce Inc. -8.49% 21.96% 10.57% -5.62%
ServiceNow Inc. 15.44% 8.80% -21.14% -12.82%
Synopsys Inc. 0.20% -4.64% -4.88% 0.92% -0.96%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Software & Services 6.45% 2.39% 11.70% -14.99%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Information Technology 0.96% 3.93% 10.55% -8.35%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).

1 2023 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 104,217 ÷ [(2,914,816 + 2,606,376) ÷ 2] = 3.78%

2 Click competitor name to see calculations.

Financial ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, Cadence Design Systems Inc. improved earnings quality from 2022 to 2023.