Accruals Ratio

[archived_user]

Under Balance sheet approach: We can measure accruals as the change in net operating assets over a period.
Under Cash Flow Statement approach: We can derive the aggregate accruals by subtracting CFO and CFI from NI.
So i understand that Under Accrual Accounting any income/expense is recognised when earned/incurred and NOT when actual cash is recieved. So my question is that what is the intituition and logic behind both of these formula to calculate accrual ratio??
Thanks to anyone who helps this poor soul.

 

[archived_user]

look at how the CFO is calculated from NI. remember the formula
CFO = NI + Depreciation + Change in Current Assets / Current Liabilities (with the sign as appropriate - MINUS for change in assets, PLUS for change in liabilities).
So NI - CFO -> provides you with the net impact of change in current assets / current liabilities. (and thus is a measure of the accruals)
CFI -> is the impact of any new investments in fixed assets. and hopefully there is no accruals here. However there might be, if you decided to “capitalize” any interest expenses, e.g.
So any accruals that are embedded in your current assets and liabilities and / or investments are brought out by this approach.