Sloan Accrual Ratio
A measure of how much of a company's reported profit comes from accounting entries rather than cash actually collected.
What it is
The Sloan accrual ratio comes from Richard Sloan's 1996 paper in The Accounting Review (volume 71, issue 3), which separated reported earnings into a cash component and an accrual component. Accruals are the bookkeeping adjustments that sit between cash moving and profit being recorded — receivables, inventory, payables, depreciation and the like. Sloan's balance-sheet-delta method measures those adjustments by looking at how working-capital accounts changed over the year and then subtracting the year's depreciation, and scales the result by average total assets so companies of different sizes can be compared. A high ratio means a large share of the year's earnings rests on accounting entries rather than cash; a low ratio means earnings are more closely backed by cash. Sloan documented that firms with high accruals were historically associated with weaker subsequent returns than firms with low accruals.
Why it matters
Two companies can report identical earnings while one collects cash and the other books receivables that may never arrive, and the accrual ratio is one of the simplest ways to tell those cases apart. It is a core earnings-quality lens: it asks whether profit is being generated or merely recorded. The same idea appears inside other frameworks — Piotroski's F-Score includes an accrual signal that checks whether operating cash flow exceeds return on assets, which is the same question asked in binary form. A pitfall is that Sloan's paper contains no fixed numeric threshold at all — portfolios were formed by ranking the full cross-section of firms into deciles each year, so a ratio is only interpretable relative to the other firms ranked in that same year, and any specific cutoff quoted elsewhere was added after the fact. High accruals are also perfectly normal for a fast-growing firm building inventory and receivables to support real sales, so the ratio is a research signal that flags a company worth reading more closely, never a verdict on the accounting or on the stock.
How it's calculated
Start with the change over the year in current assets and subtract the change in cash, which isolates the non-cash working capital that grew. From that, subtract the change in current liabilities after first removing the changes in short-term debt and in taxes payable, since those are financing and tax items rather than operating accruals. Then subtract depreciation for the year, because it is a non-cash charge already reducing reported earnings. Divide the whole figure by average total assets — the average of the opening and closing balance-sheet totals — to make the number comparable across company sizes. The result, usually shown as a percentage, is then ranked against other companies in the same period rather than read against any absolute number.
How Quintarthai uses it
Quintarthai's stock screener carries a Sloan accrual ratio % filter in its Quant Scores category, alongside the Piotroski F-Score (0-9) and Zmijewski PD %, so you can study how earnings quality varies across a universe — low accruals mean earnings are more backed by cash. Open it at /app/; the ratio is shown with its methodology and caveats as a research signal for your own reading, not as a recommendation.