Stock Analysis on Net

Tesla Inc. (NASDAQ:TSLA)

$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

Tesla 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: Short-term investments
Operating assets
Operating Liabilities
Total liabilities
Less: Current portion of debt and finance leases
Less: Debt and finance leases, net of 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
Ford Motor Co.
General Motors Co.
Balance-Sheet-Based Accruals Ratio, Sector
Automobiles & Components
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Discretionary

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
There is a consistent upward trend in net operating assets over the four-year period. The value increased from 20,710 million US dollars in 2021 to 45,330 million US dollars in 2024, more than doubling during this timeframe, indicating substantial growth in operational asset base.
Balance-sheet-based aggregate accruals
This metric exhibits significant fluctuations. Starting at 4,676 million US dollars in 2021, it rose moderately in 2022 to 6,102 million, then surged sharply in 2023 to 12,933 million, before declining markedly to 5,585 million in 2024. This pattern suggests considerable variability in accrual accounting components year over year.
Balance-sheet-based accruals ratio
The accruals ratio shows a corresponding variability. It remains relatively stable between 25.45% and 25.68% in 2021 and 2022, respectively, then spikes to 38.86% in 2023, reflecting increased accruals relative to net operating assets. In 2024, the ratio declines sharply to 13.13%, reaching the lowest point across the observed period. This indicates a reduced proportion of accruals compared to the asset base in the final year.

Cash-Flow-Statement-Based Accruals Ratio

Tesla 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 attributable to common stockholders
Less: Net cash provided by operating activities
Less: Net cash used in investing activities
Cash-flow-statement-based aggregate accruals
Financial Ratio
Cash-flow-statement-based accruals ratio1
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Ford Motor Co.
General Motors Co.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Automobiles & Components
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Discretionary

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 increased steadily over the four-year period, starting from US$ 20,710 million in 2021 and reaching US$ 45,330 million by 2024. This represents more than a doubling of these assets, indicating an expanding asset base and potentially increased operational scale.
Cash-flow-statement-based Aggregate Accruals
Aggregate accruals rose sharply from US$ 1,890 million in 2021 to a peak of US$ 17,325 million in 2023 before declining to US$ 10,955 million in 2024. This pattern suggests a substantial increase in the adjustments made to cash flow figures during 2022 and 2023, followed by a notable reduction in 2024, signaling a possible normalization or improved alignment between reported earnings and cash flows.
Cash-flow-statement-based Accruals Ratio
The accruals ratio exhibited significant volatility, rising from 10.29% in 2021 to a high of 52.06% in 2023, before dropping to 25.75% in 2024. The sharp increase to over 50% indicates a period where accruals comprised a large proportion of cash flows, potentially reflecting greater earnings management or recognition timing effects. The subsequent decrease in 2024 may reflect enhanced reporting quality or reduced earnings manipulation.
Overall Insights
The financial measures indicate that while the operational asset base expanded consistently, there were significant fluctuations in accrual accounting components within the cash flow statement. The peak in both aggregate accruals and accruals ratio in 2023 warrants attention as it suggests a period of increased accrual-based adjustments. The decline in these measures in 2024 could suggest improved financial reporting quality or changes in operational or accounting practices impacting accruals. Continuing to monitor these ratios will be important to assess ongoing earnings quality and the reliability of reported financial results.