Financial Reporting Quality: 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.
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Boeing Co. pages available for free this week:
- Balance Sheet: Assets
- Common-Size Balance Sheet: Assets
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Assets (ROA) since 2005
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
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Balance-Sheet-Based Accruals Ratio
Boeing Co., balance sheet computation of aggregate accruals
US$ in millions
| 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 and other investments | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Less: Short-term debt and 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 | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Capital Goods | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Industrials | ||||||
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 demonstrated a fluctuating trend over the four-year period. Starting at 27,012 million USD at the end of 2021, the figure decreased to 23,933 million USD in 2022 and further declined to 19,114 million USD by the end of 2023. In 2024, the value rebounded to 23,668 million USD. Overall, this depicts an initial reduction in net operating assets, followed by a partial recovery in the most recent year.
- Balance-sheet-based aggregate accruals
- There were significant variations observed in the aggregate accruals over the period. The value began at a positive 7,094 million USD in 2021 but dropped sharply to a negative 3,079 million USD in 2022 and further declined to negative 4,819 million USD in 2023. In 2024, the figure reversed to a positive 4,554 million USD, indicating substantial fluctuations and a return to positive territory in the latest reporting period.
- Balance-sheet-based accruals ratio
- The accruals ratio exhibited notable volatility between 2021 and 2024. It was 30.23% at the end of 2021, sharply declined to -12.09% in 2022, and further decreased to its lowest point of -22.39% in 2023. In 2024, the ratio showed a marked recovery, rising to 21.29%. This pattern reflects significant shifts in accrual accounting measures, with a strong negative trend reversing in the final year observed.
- Summary of trends
- Across the observed period, the company experienced considerable variability in financial reporting quality measures. Net operating assets decreased progressively for two consecutive years before rebounding. Both the balance-sheet-based aggregate accruals and accruals ratio followed similar cyclical patterns, transitioning from positive to notably negative figures before recovering substantially in the last year. These dynamics suggest periods of contraction and expansion in operating asset value alongside notable changes in accrual accounting, potentially indicating shifts in earnings quality or operational adjustments over the timeframe.
Cash-Flow-Statement-Based Accruals Ratio
Boeing Co., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Net loss attributable to Boeing Shareholders | ||||||
| Less: Net cash provided (used) by operating activities | ||||||
| Less: Net cash (used) 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 | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Capital Goods | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Industrials | ||||||
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 a fluctuating trend over the periods. Initially, there is a decline from 27,012 million US$ as of December 31, 2021, to 23,933 million US$ at the end of 2022. The decline continues more sharply to 19,114 million US$ in 2023. However, in 2024, a notable increase occurs, with net operating assets rising to 23,668 million US$. This pattern suggests variability in the asset base, possibly reflecting changes in operational investments or asset management strategies.
- Cash-flow-statement-based Aggregate Accruals
- The aggregate accruals metric remains negative for the first three periods, indicating a consistent use or recognition of accruals in the cash flow statement. The values deepen from -10,110 million US$ in 2021 to -12,817 million US$ in 2022, suggesting an increasing level of accrual adjustments. In 2023, the negative balance significantly decreases to -5,745 million US$, implying a reduction in accruals. In 2024, however, there is a marked reversal with a positive value of 12,236 million US$, indicating a substantial shift in accrual treatment or cash flow timing.
- Cash-flow-statement-based Accruals Ratio
- This ratio reflects the proportion of accruals relative to net operating assets and exhibits considerable volatility. Starting at -43.09% in 2021, it worsens to -50.32% in 2022, consistent with increased negative accrual activity relative to assets. The ratio improves to -26.69% in 2023, suggesting reduced accruals or improved cash flow alignment with operating assets. In 2024, a dramatic positive shift occurs, with the ratio increasing to 57.2%, signaling a significant change in accruals or cash inflows relative to the asset base, possibly indicating a substantial alteration in financial reporting or operational cash flows.