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

CoStar Group Inc., balance sheet computation of aggregate accruals

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Operating Assets
Total assets	8,402,470)	7,256,871)	6,915,420)	3,853,986)	3,312,957)
Less: Cash and cash equivalents	4,967,970)	3,827,126)	3,755,912)	1,070,731)	1,100,416)
Operating assets	3,434,500)	3,429,745)	3,159,508)	2,783,255)	2,212,541)
Operating Liabilities
Total liabilities	1,532,349)	1,545,199)	1,540,061)	448,393)	291,015)
Less: Long-term debt, net	989,210)	987,944)	986,715)	—)	—)
Operating liabilities	543,139)	557,255)	553,346)	448,393)	291,015)

Net operating assets¹	2,891,361)	2,872,490)	2,606,162)	2,334,862)	1,921,526)
Balance-sheet-based aggregate accruals²	18,871)	266,328)	271,300)	413,336)	—)
Financial Ratio
Balance-sheet-based accruals ratio³	0.65%	9.72%	10.98%	19.42%	—
Benchmarks
Balance-Sheet-Based Accruals Ratio, Industry
Industrials	0.12%	3.77%	5.75%	200.00%	—

Based on: 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: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= 3,434,500 – 543,139 = 2,891,361

² 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets₂₀₂₂ – Net operating assets₂₀₂₁
= 2,891,361 – 2,872,490 = 18,871

³ 2022 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 18,871 ÷ [(2,891,361 + 2,872,490) ÷ 2] = 0.65%

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, CoStar Group Inc. improved earnings quality from 2021 to 2022.

CoStar Group Inc., cash flow statement computation of aggregate accruals

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income	369,453)	292,564)	227,128)	314,963)	238,334)
Less: Net cash provided by operating activities	478,620)	469,731)	486,106)	457,780)	335,458)
Less: Net cash used in investing activities	(69,055)	(381,343)	(464,163)	(483,753)	(448,001)
Cash-flow-statement-based aggregate accruals	(40,112)	204,176)	205,185)	340,936)	350,877)
Financial Ratio
Cash-flow-statement-based accruals ratio¹	-1.39%	7.45%	8.31%	16.02%	—
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials	-4.47%	-8.82%	-2.05%	-11.47%	—

Based on: 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: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ 2022 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -40,112 ÷ [(2,891,361 + 2,872,490) ÷ 2] = -1.39%

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, CoStar Group Inc. improved earnings quality from 2021 to 2022.

CoStar Group Inc. (NASDAQ:CSGP)

Financial Reporting Quality: Aggregate Accruals

Balance-Sheet-Based Accruals Ratio

Cash-Flow-Statement-Based Accruals Ratio