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Marathon Oil Corp. (MRO) | Aggregate Accruals
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
Marathon Oil Corp., 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 | ||||||
| Assets | 31,371 | 50,014 | 47,052 | 42,686 | 42,746 | |
| Less: Cash and cash equivalents | 493 | 3,951 | 2,057 | 1,285 | 1,199 | |
| Operating assets | 30,878 | 46,063 | 44,995 | 41,401 | 41,547 | |
| Operating Liabilities | ||||||
| Total liabilities | 14,212 | 26,243 | 25,142 | 21,277 | 23,523 | |
| Less: Long-term debt due within one year | 141 | 295 | 96 | 98 | 1,131 | |
| Less: Long-term debt, excluding due within one year | 4,674 | 7,601 | 8,436 | 7,087 | 6,084 | |
| Operating liabilities | 9,397 | 18,347 | 16,610 | 14,092 | 16,308 | |
| Net operating assets1 | 21,481 | 27,716 | 28,385 | 27,309 | 25,239 | |
| Balance-sheet-based aggregate accruals2 | (6,235) | (669) | 1,076 | 2,070 | ||
| Balance-Sheet-Based Accruals Ratio, Comparison to Industry | ||||||
| Marathon Oil Corp.3 | -25.35% | -2.38% | 3.86% | 7.88% | ||
| Industry, Oil & Gas | 8.98% | 14.76% | 17.42% | 200.00% | ||
2011 Calculations
1 Net operating assets = Operating assets – Operating liabilities
= 30,878 – 9,397 = 21,481
2 Balance-sheet-based aggregate accruals = Net operating assets 2011 – Net operating assets 2010
= 21,481 – 27,716 = -6,235
3 Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -6,235 ÷ [(21,481 + 27,716) ÷ 2] = -25.35%
| 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, Marathon Oil Corp. deteriorated earnings quality from 2010 to 2011. |
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Cash-Flow-Statement-Based Accruals Ratio
Marathon Oil Corp., 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 | 2,946 | 2,568 | 1,463 | 3,528 | 3,956 | |
| Less: Net cash provided by operating activities | 5,434 | 5,873 | 5,210 | 6,782 | 6,521 | |
| Less: Net cash used in investing activities | (7,667) | (2,621) | (5,238) | (5,435) | (8,102) | |
| Cash-flow-statement-based aggregate accruals | 5,179 | (684) | 1,491 | 2,181 | 5,537 | |
| Cash-Flow-Statement-Based Accruals Ratio, Comparison to Industry | ||||||
| Marathon Oil Corp.1 | 21.05% | -2.44% | 5.35% | 8.30% | ||
| Industry, Oil & Gas | 10.57% | 8.52% | 9.18% | 15.79% | ||
2011 Calculations
1 Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 5,179 ÷ [(21,481 + 27,716) ÷ 2] = 21.05%
| 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, Marathon Oil Corp. deteriorated earnings quality from 2010 to 2011. |
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