E.I. DuPont de Nemours & Co. (DD)

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.

Balance-Sheet-Based Accruals Ratio

E.I. DuPont de Nemours & Co., balance sheet computation of aggregate accruals

USD $ in millions

	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
Operating Assets
Total assets	48,492	40,410	38,185	36,209	34,131
Less: Cash and cash equivalents	3,586	4,263	4,021	3,645	1,305
Less: Marketable securities	433	2,538	2,116	59	131
Operating assets	44,473	33,609	32,048	32,505	32,695
Operating Liabilities
Total liabilities	39,430	30,667	30,534	28,657	22,553
Less: Short-term borrowings and capital lease obligations	817	133	1,506	2,012	1,370
Less: Long-term borrowings and capital lease obligations	11,736	10,137	9,528	7,638	5,955
Operating liabilities	26,877	20,397	19,500	19,007	15,228

Net operating assets¹	17,596	13,212	12,548	13,498	17,467
Balance-sheet-based aggregate accruals²	4,384	664	(950)	(3,969)
Balance-Sheet-Based Accruals Ratio, Comparison to Industry
E.I. DuPont de Nemours & Co.³	28.46%	5.16%	-7.29%	-25.64%
Industry, Basic Materials	8.98%	19.09%	11.54%	-5.91%

2011 Calculations

¹ Net operating assets = Operating assets – Operating liabilities
= 44,473 – 26,877 = 17,596

² Balance-sheet-based aggregate accruals = Net operating assets ₂₀₁₁ – Net operating assets ₂₀₁₀
= 17,596 – 13,212 = 4,384

³ Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 4,384 ÷ [(17,596 + 13,212 ) ÷ 2] = 28.46%

Ratio	Description	The company
Balance-sheet-based accruals ratio	Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets.	Using the balance-sheet-based accruals ratio, E.I. DuPont de Nemours & Co. deteriorated earnings quality from 2010 to 2011.

Cash-Flow-Statement-Based Accruals Ratio

E.I. DuPont de Nemours & Co., cash flow statement computation of aggregate accruals

USD $ in millions

	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
Net income attributable to DuPont	3,474	3,031	1,755	2,007	2,988
Less: Cash provided by operating activities	5,152	4,559	4,741	3,129	4,290
Less: Cash used for investing activities	(6,238)	(2,439)	(4,298)	(1,610)	(1,750)
Cash-flow-statement-based aggregate accruals	4,560	911	1,312	488	448
Cash-Flow-Statement-Based Accruals Ratio, Comparison to Industry
E.I. DuPont de Nemours & Co.¹	29.60%	7.07%	10.07%	3.15%
Industry, Basic Materials	11.00%	7.42%	5.13%	2.82%

2011 Calculations

¹ Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 4,560 ÷ [(17,596 + 13,212 ) ÷ 2] = 29.60%

Ratio	Description	The company
Cash-flow-statement-based accruals ratio	Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets.	Using the cash-flow-statement-based accruals ratio, E.I. DuPont de Nemours & Co. deteriorated earnings quality from 2010 to 2011.

E.I. DuPont de Nemours & Co. (DD) | Aggregate Accruals

Balance-Sheet-Based Accruals Ratio

Cash-Flow-Statement-Based Accruals Ratio

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