Stock Analysis on Net

3M Co. (NYSE:MMM)

Financial Reporting Quality: Aggregate Accruals 

Microsoft Excel LibreOffice Calc

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

3M Co., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Operating Assets
Total assets 47,072  47,344  44,659  36,500  37,987 
Less: Cash and cash equivalents 4,564  4,634  2,353  2,853  3,053 
Less: Marketable securities, current 201  404  98  380  1,076 
Operating assets 42,307  42,306  42,208  33,267  33,858 
Operating Liabilities
Total liabilities 31,955  34,413  34,533  26,652  26,365 
Less: Short-term borrowings and current portion of long-term debt 1,307  806  2,795  1,211  1,853 
Less: Current obligations of finance leases 22  21  17  13 
Less: Long-term debt, excluding current portion 16,056  17,989  17,518  13,411  12,096 
Less: Finance leases, net of current obligations 93  93  111  75  60 
Operating liabilities 14,492  15,503  14,088  11,938  12,343 
 
Net operating assets1 27,815  26,803  28,120  21,329  21,515 
Balance-sheet-based aggregate accruals2 1,012  (1,317) 6,791  (186) — 
Financial Ratio
Balance-sheet-based accruals ratio3 3.71% -4.80% 27.47% -0.87%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Boeing Co. 30.23% 75.78% 44.72% 114.97%
Caterpillar Inc. 4.22% -1.86% 2.83% 5.76%
General Electric Co. -33.29% -8.79% -52.01% -32.87%
Honeywell International Inc. 9.04% 2.69% 2.63% -3.49%
Lockheed Martin Corp. 23.38% 5.01% -3.23% 31.19%
Raytheon Technologies Corp. 1.48% 18.38% 0.61% 46.18%
Balance-Sheet-Based Accruals Ratio, Sector
Capital Goods -0.58% 7.11% -13.69% -3.22%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials 2.16% 2.04% -7.02% -1.05%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 2021 Calculation
Net operating assets = Operating assets – Operating liabilities
= 42,30714,492 = 27,815

2 2021 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2021 – Net operating assets2020
= 27,81526,803 = 1,012

3 2021 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,012 ÷ [(27,815 + 26,803) ÷ 2] = 3.71%

4 Click competitor name to see calculations.

Financial 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, 3M Co. improved earnings quality from 2020 to 2021.

Cash-Flow-Statement-Based Accruals Ratio

3M Co., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net income attributable to 3M 5,921  5,384  4,570  5,349  4,858 
Less: Net cash provided by operating activities 7,454  8,113  7,070  6,439  6,240 
Less: Net cash (used in) provided by investing activities (1,317) (580) (6,444) 222  (3,086)
Cash-flow-statement-based aggregate accruals (216) (2,149) 3,944  (1,312) 1,704 
Financial Ratio
Cash-flow-statement-based accruals ratio1 -0.79% -7.83% 15.95% -6.12%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Boeing Co. -43.09% 172.40% 45.55% -6.67%
Caterpillar Inc. 5.38% -4.23% 2.56% 6.74%
General Electric Co. -53.22% -20.57% -25.92% -29.70%
Honeywell International Inc. 2.16% -1.79% -0.92% -2.89%
Lockheed Martin Corp. -10.24% 4.50% 1.10% 23.33%
Raytheon Technologies Corp. -1.96% -12.62% -0.32% 24.46%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Capital Goods -14.33% -1.66% -6.10% -8.00%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials -8.30% -1.76% -2.65% -3.78%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 2021 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -216 ÷ [(27,815 + 26,803) ÷ 2] = -0.79%

2 Click competitor name to see calculations.

Financial 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, 3M Co. improved earnings quality from 2020 to 2021.