AC466 Unit 6 Cash Versus Earnings Analysis Example

Course	AC466 Fraud Detection and Financial Statement Analysis
Unit	Unit 6
Paper type	Cash versus earnings analysis
Length	About 550 words, 5 pages double-spaced
Format	APA 7 student paper
School	Purdue University Global
Program	BS in Accounting
Updated	October 2026

Free sample paper for AC466 Unit 6

$65 Million Earned, $18 Million Collected: A Unit 6 Cash Versus Earnings Analysis With Accruals and an M-Score

[Student Name]

Purdue University Global

AC466: Fraud Detection and Financial Statement Analysis

Unit 6 Cash Versus Earnings Analysis

[Instructor Name]

[Date]

Tidewell Pool Systems and every figure are composite; the M-score uses Beneish's published coefficients; the articles and textbook cited are real.

What this part is doingStating the gap and the three tools in the lead shows the analysis's method before its results.

The 2025 Bridge

Net income: $65.0 million. Add depreciation and amortization, $15.0 million. Subtract the increase in trade receivables, $43.5 million, and the new noncurrent distributor notes, $12.0 million. Subtract the decline in deferred service revenue, $5.5 million, and the increase in inventory, $7.8 million. Add the increase in payables, $6.0 million. Subtract the decline in the warranty reserve, $2.2 million, and add other items, $3.0 million. Operating cash flow: $18.0 million.

Receivables and notes together absorb $55.5 million, more than the entire gap between earnings and cash. The deferred revenue decline and the warranty reserve decline add $7.7 million of earnings recognized without matching cash.

Accruals Ratio

Here the accruals ratio takes the excess of earnings over operating cash and scales it by the year's average total assets. In 2023, ($33.0 minus $52.0) over $500.3 million is minus 3.8 percent: cash exceeded earnings. In 2024, ($45.0 minus $41.0) over $548.4 million is 0.7 percent. In 2025, ($65.0 minus $18.0) over $638.3 million is 7.4 percent.

Sloan (1996) studied decades of firm-years and reported that income resting heavily on accruals shrank in the following years more than income backed by cash, and that share prices were slow to reflect the difference. A swing from minus 3.8 to plus 7.4 percent in two years moves Tidewell from cash-rich earnings to accrual-heavy earnings.

The gap between earnings and cash is not spread across the business but concentrated in receivables, so the question the analysis hands forward is not whether Tidewell is profitable but whether its customers owe what its income statement says they owe.

What this part is doingThe highlighted sentence locates the divergence precisely, the conclusion graders look for in a bridge.

Beneish M-Score, 2025 Against 2024

Days sales in receivables index, 1.256. Gross margin index, 0.964. Asset quality index, 1.146. Sales growth index, 1.177. Depreciation index, 0.994. Selling and administrative expense index, 0.949. Debt-to-assets index, 0.936. Total accruals to total assets, 0.068.

M-score for 2025: minus 1.70. For 2024: minus 2.09.

Beneish (1999) estimated the model on firms later found to have manipulated earnings, and scores above about minus 1.78 resemble that group more than the control firms. Tidewell's score crossed that line in 2025, driven mainly by the receivables index and sales growth. The score is a screen, not a finding: it is built on a sample from decades ago, misclassifies some firms in both directions and says nothing about why a ratio moved.

Appendix: The Script

The figures above come from a short Python script that reads three years of statement data from a spreadsheet export and prints every intermediate value. Its core lines are:

accruals = (ni[y]-ocf[y]) / ((ta[y]+ta[y-1])/2)

dsri = (ar[y]/rev[y]) / (ar[y-1]/rev[y-1])

m = -4.84 + 0.92*dsri + 0.528*gmi + 0.404*aqi + 0.892*sgi + 0.115*depi + (-0.172)*sgai + 4.679*tata + (-0.327)*lvgi

Every input is read from the export, and every index is printed beside its numerator and denominator, so each step can be checked by hand. A script makes the work reproducible in a way a spreadsheet with hidden formulas does not (Penman, 2013).

What this part is doingEnding on the script shows the analysis can be rerun, which is what makes its numbers checkable.

References

Beneish, M. D. (1999). The detection of earnings manipulation. Financial Analysts Journal, 55(5), 24-36. https://doi.org/10.2469/faj.v55.n5.2296

Penman, S. H. (2013). Financial statement analysis and security valuation (5th ed.). McGraw Hill.

Sloan, R. G. (1996). Do stock prices fully reflect information in accruals and cash flows about future earnings? The Accounting Review, 71(3), 289-315.

The Purdue Global AC466 Unit 6 instructions

Unit 6 of AC466 asks you to analyze the gap between reported earnings and operating cash flow. Build a bridge from net income to operating cash for the most recent year, item by item, and identify which items account for most of the gap. Compute an accruals ratio for several years, stating the formula, and explain what a rising ratio has meant in research on earnings quality. Compute a screening score such as Beneish's M-score with every index shown, compare it across years and identify the indices driving any change. Explain what the score measures and its limits. Document your computations so they can be reproduced, whether in a script or a spreadsheet with visible formulas. Close by stating the question the analysis hands forward. Credit Sloan and Beneish for the measures you use, in APA 7.

Inside the AC466 Unit 6 example

The sample's bridge walks from $65.0 million to $18.0 million through depreciation, receivables, notes, deferred revenue, inventory, payables, the warranty reserve and other items, and notes that receivables and notes alone exceed the gap. The accruals section computes minus 3.8, 0.7 and 7.4 percent and cites Sloan on the weaker persistence of accrual-heavy income. The highlighted sentence locates the gap in receivables and frames the next question. The M-score section lists all eight indices for 2025, including receivables at 1.256 and sales growth at 1.177, reports scores of minus 2.09 and minus 1.70, and explains Beneish's threshold and the score's limits. An appendix shows the script's core lines and explains how each index is printed for checking.

AC466 Unit 6 rubric: what earns full points

AC466 cash versus earnings analyses are graded on an accurate bridge, correct ratios and honest interpretation of screening scores. The bridge must reconcile exactly and identify which items drive the gap. The accruals ratio should be computed consistently, with its formula stated, and interpreted using research on earnings persistence. Graders check that the M-score shows all eight indices and that the writer explains what moved it rather than reporting a single number. The score's limits, including its age and its errors in both directions, must be acknowledged. Reproducible computations earn credit because they let a grader verify every figure. A clear statement of the question the analysis leaves open shows how it fits the larger inquiry. Correct citations in APA 7 conclude what Purdue Global grades here.

AC466 Unit 6 help: mistakes that cost points

Many Unit 6 analyses report the gap between earnings and cash without bridging it, so the reader cannot see where it comes from. Others compute an accruals ratio without stating the formula or comparing years. The M-score is reported as a verdict of manipulation, or as a single number with no indices. Its limits are ignored. Calculations are hidden in a spreadsheet the grader cannot follow. The bridge fails to reconcile. Our writers can run the bridge, ratios and score on the company your section assigned, with every step shown.

Get an AC466 Unit 6 example written to your instructions

Three consecutive years of figures are the minimum for Unit 6, because the M-score compares two and the trend wants a third; send the filings, the prompt and the rubric, and say whether the section requires code. The script and its output come with the paper. The first custom analysis is free and arrives inside 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.

More AC466 papers and BS in Accounting samples

AC466 Unit 6 questions, answered

What does a Beneish M-score actually measure?

It estimates how closely a company's financial pattern resembles firms that were later found to have manipulated earnings, using eight indices built from two years of statements. Messod Beneish estimated the weights on a sample from the 1980s and early 1990s. A score above the cutoff marks a company for closer reading; it does not identify manipulation, and many legitimate fast-growing firms score above it.

Why compute the ratios with a script instead of a spreadsheet?

Either works, and some sections specify one. A short script makes every step visible and repeatable: the inputs are listed once, each index is computed in a named line, and anyone can rerun it and get the same result. The sample prints intermediate values so a grader can trace the score back to specific statement lines.

Can the analysis run on my assigned company?

Yes. Send three years of statements or the filings your section names, the prompt and the rubric. The bridge, accruals ratio and M-score are computed from those figures, with the script and its output included, and the interpretation reports what the screens suggest about your company without treating a score as a verdict.

Where can I find a free AC466 Unit 6 sample paper?

This page holds a complete AC466 Unit 6 cash versus earnings analysis for a composite pool equipment maker, with a cash bridge, three years of accruals ratios, an eight-index M-score, a script and APA 7 references.

What drives the AC466 Unit 6 M-score?

Mainly the days sales in receivables index of 1.256 and the sales growth index of 1.177, with accruals adding to it. Together they lift the score from minus 2.09 to minus 1.70.