Stock Analysis on Net
Stock Analysis on Net

Microchip Technology Inc. (NASDAQ:MCHP)

$22.49

This company has been moved to the archive! The financial data has not been updated since February 2, 2023.

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.

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Balance-Sheet-Based Accruals Ratio

Microchip Technology Inc., balance sheet computation of aggregate accruals

US$ in thousands

Microsoft Excel
Mar 31, 2022 Mar 31, 2021 Mar 31, 2020 Mar 31, 2019 Mar 31, 2018 Mar 31, 2017
Operating Assets
Total assets
Less: Cash and cash equivalents
Less: Short-term investments
Operating assets
Operating Liabilities
Total liabilities
Less: Current portion of long-term debt
Less: Long-term debt excluding current maturities
Operating liabilities
 
Net operating assets1
Balance-sheet-based aggregate accruals2
Financial Ratio
Balance-sheet-based accruals ratio3
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Advanced Micro Devices Inc.
Analog Devices Inc.
Applied Materials Inc.
Broadcom Inc.
Intel Corp.
KLA Corp.
Lam Research Corp.
Micron Technology Inc.
NVIDIA Corp.
Qualcomm Inc.
Texas Instruments Inc.
Balance-Sheet-Based Accruals Ratio, Sector
Semiconductors & Semiconductor Equipment
Balance-Sheet-Based Accruals Ratio, Industry
Information Technology

Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =

2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= – =

3 2022 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =

4 Click competitor name to see calculations.

Net Operating Assets
The value of net operating assets exhibits a significant increase from 4,151,500 thousand US dollars in 2018 to a peak of 15,163,600 thousand US dollars in 2019. Following this peak, there is a gradual decline observed over the subsequent years, with values decreasing to 14,664,700 thousand US dollars in 2020, then to 13,959,200 thousand US dollars in 2021, and further to 13,262,800 thousand US dollars in 2022. This pattern indicates a substantial investment or expansion phase in 2019, followed by a period of contraction or asset reduction in the following years.
Balance-Sheet-Based Aggregate Accruals
The balance-sheet-based aggregate accruals show considerable volatility across the periods. In 2018, the figure is negative at -766,915 thousand US dollars, suggesting a reduction in accruals or adjustments reducing net income. In 2019, there is an abrupt and substantial increase to 11,012,100 thousand US dollars, indicating significant accrual activity during this year. Subsequently, the accruals return to negative figures with -498,900 thousand US dollars in 2020, -705,500 thousand US dollars in 2021, and -696,400 thousand US dollars in 2022. This fluctuation implies that the accruals component experienced an unusual spike in 2019, surrounded by years of negative or reversing accrual amounts.
Balance-Sheet-Based Accruals Ratio
The accruals ratio mirrors the volatility seen in aggregate accruals. It starts at -16.91% in 2018, flips sharply to a high positive ratio of 114.03% in 2019, then declines back to small negative ratios of -3.35% in 2020, -4.93% in 2021, and -5.12% in 2022. This ratio trend indicates that accruals represented an unusually large proportion of net operating assets in 2019, suggesting potential fluctuations in earnings quality or accounting adjustments that year. The negative ratios in other years suggest more conservative or typical accrual levels.

Cash-Flow-Statement-Based Accruals Ratio

Microchip Technology Inc., cash flow statement computation of aggregate accruals

US$ in thousands

Microsoft Excel
Mar 31, 2022 Mar 31, 2021 Mar 31, 2020 Mar 31, 2019 Mar 31, 2018 Mar 31, 2017
Net income
Less: Net cash provided by operating activities
Less: Net cash used in investing activities
Cash-flow-statement-based aggregate accruals
Financial Ratio
Cash-flow-statement-based accruals ratio1
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Advanced Micro Devices Inc.
Analog Devices Inc.
Applied Materials Inc.
Broadcom Inc.
Intel Corp.
KLA Corp.
Lam Research Corp.
Micron Technology Inc.
NVIDIA Corp.
Qualcomm Inc.
Texas Instruments Inc.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Semiconductors & Semiconductor Equipment
Cash-Flow-Statement-Based Accruals Ratio, Industry
Information Technology

Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

1 2022 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =

2 Click competitor name to see calculations.

Net Operating Assets
The net operating assets showed a significant increase from approximately 4.15 billion USD in the fiscal year ending March 31, 2018, to a peak of around 15.16 billion USD in the following year. Subsequently, a steady decline was observed over the next three years, dropping to approximately 13.26 billion USD by March 31, 2022. This trend indicates an initial expansion phase, followed by a gradual reduction in net operating assets over the last three years.
Cash-flow-statement-based Aggregate Accruals
The aggregate accruals displayed high volatility during the five-year period. Starting with a negative value of approximately -152.5 million USD in 2018, the figure surged to roughly 5.49 billion USD by 2019, indicating a substantial increase in accruals. The following years saw negative accrual values again, with -840 million USD in 2020, -1.39 billion USD in 2021, and -1.08 billion USD in 2022. This pattern reflects irregularities or fluctuations in the accrual components derived from the cash-flow statement, suggesting varying adjustments between accounting earnings and cash flows.
Cash-flow-statement-based Accruals Ratio
The accruals ratio mirrored the volatility observed in aggregate accruals. It started at a negative 3.36% in 2018 and then sharply increased to a high of 56.87% in 2019. In the subsequent years, the ratio returned to negative territory, registering -5.63% in 2020, -9.74% in 2021, and -7.93% in 2022. This ratio pattern implies that, relative to net operating assets or related bases, the extent of accruals experienced dramatic fluctuations, peaking in 2019 before moving into moderately negative ratios in later years.
Overall Insights
The data reflects a period of significant expansion in net operating assets followed by a contraction phase. Concurrently, the cash-flow-based accruals and their ratio showed marked volatility, particularly in 2019, where an unusually high positive accrual was recorded. After this peak, figures reverted to negative, which might indicate changes in working capital management, accounting policies, or operational conditions impacting the accrual quality. The negative accruals ratios in the last three years suggest a tendency toward conservative earnings recognition relative to cash flows during this period.