ayaz_mahmud369

Accruals are NOT Financing ones.

What comprises CFF?
Share purchases
Debt issuance
Dividend paid
Debt retirement

All of these are fairly non-accrual based.

Accruals come in due to CFO and CFI. How - see below:

But if you look at CFO -> you have Working capital changes
Accounts receivable - provision for doubtful accounts muck up the deal - in the sense that could be manipulated to provide different results. Also credit terms + close linkage to unearned revenue cause the necessity to look at year-on-year changes in AR. Revenue is accounted for in your Net Income.

Inventory: Inventory obsolescence thro' an account may cause year-on-year changes in the account - which may all not be in COGS (accounted for in your Net Income)
+ classificaion.

AP - changes in payables terms cause changes in your AP balances, which may overstate / understate your COGS/expenses.

CFI - what goes in there? Capital Expenditure. If this is only PP&E - it is good.
But company could choose to capitalize expenses - which would increase CFI.

So if you took your Net income figure and removed your CFO and CFI - what you are left with is the total impact of accruals on net income.

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on a side note - same is being done on your balance sheet accruals as well.
NOA = (Total assets - Cash) - (total Liabs - Debt)

so you are looking at change in NOA - between periods - which means you are picking up the impact of Accruals in total Assets and total Liabs.

CP