audit earning-quality
Earnings quality — is the profit real cash or paper numbers?
When to use
Buffett: "Earnings are not cash." Verify whether a company's profits are backed by actual cash flow.
Quick Start
# Full earnings quality report
audit earning-quality
# Only last 5 years
audit earning-quality --years 2020-2024
Command
audit earning-quality [--years xxxx-yyyy] [--period q1|h1|9m|annual] [--help]
| Parameter | Description | Default |
|---|---|---|
--years |
Year range | All years |
--period |
Fiscal period | annual |
Core Metrics
| Metric | Formula | Meaning |
|---|---|---|
| Accruals Ratio | Divergence between profit and cash | |
| Cash Conversion | Cash generated per dollar of profit | |
| FCF Conversion | Cash after CapEx per dollar of profit |
Key signals:
- Accruals negative → good (OCF > NI, more cash than profit)
- Accruals positive → bad (NI > OCF, profit may be inflated)
- Cash Conversion > 80% → strong
- FCF Conversion > 80% → excellent quality
Advisory
Accruals Ratio
| Status | Threshold |
|---|---|
[+] |
Negative (OCF > NI) |
[-] |
Positive (NI > OCF) |
Cash Conversion
| Status | Threshold |
|---|---|
[+] |
> 80% |
[~] |
50-80% |
[-] |
< 50% |
FCF Conversion
| Status | Threshold |
|---|---|
[+] |
> 80% |
[~] |
30-80% |
[-] |
< 30% |
Field IDs
| Name | Industrial | Banking | Insurance |
|---|---|---|---|
| Net Income to Common Stockholders | income:1145 | income:2148 | income:3150 |
| Operating Cash Flow | cash_flow:1201 | cash_flow:2201 | cash_flow:3201 |
| Free Cash Flow | cash_flow:1240 | cash_flow:2243 | cash_flow:3246 |
| Total Assets | balance_sheet:1301 | balance_sheet:2301 | balance_sheet:3301 |
Industry Routing
All industries (industrial, banking, insurance) use the same metrics.
Output Example
EARNING QUALITY
TICKER: [US.AAPL - Apple Inc.]
PERIOD: [2020-ANNUAL ~ 2024-ANNUAL]
[+] Accruals Ratio: -2.3% (OCF > NI, excellent cash generation)
[+] Cash Conversion: 116% (> 80% = strong)
[+] FCF Conversion: 103% (> 80% = excellent quality)
Metric Value
-------------------------------
Avg Accruals Ratio -2.3%
Avg Cash Conversion 116%
Avg FCF Conversion 103%
Cash Conv Stability 8.2%
Period Net Income OCF FCF Accruals Cash Conv FCF Conv
------------------------------------------------------------------------
2020 ANNUAL 57.41B 80.67B 73.36B -3.8% 140.5% 127.8%
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