Stock Analysis on Net

Amgen Inc. (NASDAQ:AMGN)

$24.99

Financial Reporting Quality: Aggregate Accruals

Microsoft Excel

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.

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Balance-Sheet-Based Accruals Ratio

Amgen Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Operating Assets
Total assets
Less: Cash and cash equivalents
Less: Marketable securities
Operating assets
Operating Liabilities
Total liabilities
Less: Current portion of long-term debt
Less: Long-term debt, excluding current portion
Operating liabilities
 
Net operating assets1
Balance-sheet-based aggregate accruals2
Financial Ratio
Balance-sheet-based accruals ratio3
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
AbbVie Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Vertex Pharmaceuticals Inc.
Balance-Sheet-Based Accruals Ratio, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Balance-Sheet-Based Accruals Ratio, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= =

2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= =

3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =

4 Click competitor name to see calculations.


Net Operating Assets
The net operating assets exhibited an overall increasing trend from 2021 to 2023, rising from 31,972 million US dollars to 59,901 million US dollars. However, in 2024, there was a decline to 54,003 million US dollars, indicating a reduction in net operating assets after the substantial growth observed in the previous year.
Balance-Sheet-Based Aggregate Accruals
The balance-sheet-based aggregate accruals showed notable volatility across the periods. Initially, there was an increase from 224 million US dollars in 2021 to 1,329 million US dollars in 2022. This was followed by a dramatic surge in 2023, reaching 26,600 million US dollars. In 2024, however, the figure reversed sharply to a negative value of -5,898 million US dollars, indicating a significant reversal or adjustment in accruals.
Balance-Sheet-Based Accruals Ratio
The accruals ratio mirrored the pattern observed in aggregate accruals, increasing from a low level of 0.7% in 2021 to 4.07% in 2022. It then escalated sharply to 57.08% in 2023, suggesting an unusually large proportion of accruals relative to net operating assets that year. The ratio dropped substantially in 2024 to -10.36%, reflecting a substantial negative accrual impact relative to the size of net operating assets.

Cash-Flow-Statement-Based Accruals Ratio

Amgen Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net income
Less: Net cash provided by operating activities
Less: Net cash (used in) provided by investing activities
Cash-flow-statement-based aggregate accruals
Financial Ratio
Cash-flow-statement-based accruals ratio1
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
AbbVie Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Vertex Pharmaceuticals Inc.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Cash-Flow-Statement-Based Accruals Ratio, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =

2 Click competitor name to see calculations.


Net Operating Assets
The net operating assets exhibit an overall increasing trend, rising from 31,972 million USD at the end of 2021 to a peak of 59,901 million USD in 2023, followed by a slight decrease to 54,003 million USD in 2024. This indicates substantial growth in operating asset base over the period, with a notable surge between 2022 and 2023, then a modest contraction in the last year.
Cash-flow-statement-based Aggregate Accruals
The aggregate accruals show significant volatility. The value starts negative at -4,101 million USD in 2021, shifts to positive 2,875 million USD in 2022, rises sharply to 24,450 million USD in 2023, then declines to a negative figure of -6,354 million USD in 2024. This pattern reflects substantial fluctuations in accruals, highlighting periods of both large non-cash increases and decreases affecting the cash flow statement.
Cash-flow-statement-based Accruals Ratio
The accruals ratio experiences considerable variation, moving from -12.87% in 2021 to a positive 8.81% in 2022, then peaking at an elevated 52.47% in 2023, before declining again to -11.16% in 2024. This ratio swings from negative to highly positive back to negative, indicating inconsistency in accruals relative to net operating assets and suggesting fluctuating quality in reported earnings relative to cash flows.