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
Cash-Flow-Statement-Based Accruals Ratio

Cintas Corp., balance sheet computation of aggregate accruals

US$ in thousands

	May 31, 2024	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019
Operating Assets
Total assets	9,168,817)	8,546,356)	8,147,256)	8,236,823)	7,669,885)	7,436,662)
Less: Cash and cash equivalents	342,015)	124,149)	90,471)	493,640)	145,402)	96,645)
Operating assets	8,826,802)	8,422,207)	8,056,785)	7,743,183)	7,524,483)	7,340,017)
Operating Liabilities
Total liabilities	4,852,445)	4,682,370)	4,839,060)	4,548,976)	4,434,683)	4,433,941)
Less: Debt due within one year	449,595)	—)	311,574)	899,070)	—)	312,264)
Less: Debt due after one year	2,025,934)	2,486,405)	2,483,932)	1,642,833)	2,539,705)	2,537,507)
Operating liabilities	2,376,916)	2,195,965)	2,043,554)	2,007,073)	1,894,978)	1,584,170)

Net operating assets¹	6,449,886)	6,226,242)	6,013,231)	5,736,110)	5,629,505)	5,755,847)
Balance-sheet-based aggregate accruals²	223,644)	213,011)	277,121)	106,605)	(126,342)	—)
Financial Ratio
Balance-sheet-based accruals ratio³	3.53%	3.48%	4.72%	1.88%	-2.22%	—
Benchmarks
Balance-Sheet-Based Accruals Ratio, Industry
Industrials	0.00%	-1.95%	0.18%	3.74%	5.63%	—

Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).

¹ 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= 8,826,802 – 2,376,916 = 6,449,886

² 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets₂₀₂₄ – Net operating assets₂₀₂₃
= 6,449,886 – 6,226,242 = 223,644

³ 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 223,644 ÷ [(6,449,886 + 6,226,242) ÷ 2] = 3.53%

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, Cintas Corp. deteriorated earnings quality from 2023 to 2024.

Cintas Corp., cash flow statement computation of aggregate accruals

US$ in thousands

	May 31, 2024	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019
Net income	1,571,592)	1,348,010)	1,235,757)	1,110,968)	876,037)	884,981)
Less: Net cash provided by operating activities	2,079,781)	1,597,814)	1,537,625)	1,360,740)	1,291,483)	1,067,862)
Less: Net cash used in investing activities	(608,631)	(388,672)	(402,635)	(137,215)	(285,398)	(235,638)
Cash-flow-statement-based aggregate accruals	100,442)	138,868)	100,767)	(112,557)	(130,048)	52,757)
Financial Ratio
Cash-flow-statement-based accruals ratio¹	1.58%	2.27%	1.72%	-1.98%	-2.28%	—
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials	0.00%	1.34%	-4.38%	-8.72%	-2.05%	—

Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).

¹ 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 100,442 ÷ [(6,449,886 + 6,226,242) ÷ 2] = 1.58%

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, Cintas Corp. improved earnings quality from 2023 to 2024.

Cintas Corp. (NASDAQ:CTAS)

Financial Reporting Quality: Aggregate Accruals

Balance-Sheet-Based Accruals Ratio

Cash-Flow-Statement-Based Accruals Ratio