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Microsoft Excel LibreOffice Calc

Caterpillar Inc. (CAT)

Financial Reporting Quality: Aggregate Accruals

Difficulty: Advanced

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

Caterpillar Inc., balance sheet computation of aggregate accruals

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Operating Assets
Total assets hidden hidden hidden hidden hidden
Less: Cash and short-term investments hidden hidden hidden hidden hidden
Operating assets hidden hidden hidden hidden hidden
Operating Liabilities
Total liabilities hidden hidden hidden hidden hidden
Less: Short-term borrowings hidden hidden hidden hidden hidden
Less: Long-term debt due within one year hidden hidden hidden hidden hidden
Less: Long-term debt due after one year hidden hidden hidden hidden hidden
Operating liabilities hidden hidden hidden hidden hidden
Net operating assets1 hidden hidden hidden hidden hidden
Balance-sheet-based aggregate accruals2 hidden hidden hidden hidden hidden
Ratio
Balance-sheet-based accruals ratio3 hidden% hidden% hidden% hidden% hidden%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors
Illinois Tool Works Inc. hidden% hidden% hidden% hidden% hidden%
Balance-Sheet-Based Accruals Ratio, Sector
Industrial Engineering hidden% hidden% hidden% hidden% hidden%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 Net operating assets = Operating assets – Operating liabilities
= hidden – hidden = hidden

2 Balance-sheet-based aggregate accruals = Net operating assets 2017 – Net operating assets 2016
= hidden – hidden = hidden

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

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, Caterpillar Inc. improved earnings quality from 2016 to 2017.

Cash-Flow-Statement-Based Accruals Ratio

Caterpillar Inc., cash flow statement computation of aggregate accruals

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Profit (loss) attributable to common stockholders hidden hidden hidden hidden hidden
Less: Net cash provided by operating activities hidden hidden hidden hidden hidden
Less: Net cash used for investing activities hidden hidden hidden hidden hidden
Cash-flow-statement-based aggregate accruals hidden hidden hidden hidden hidden
Ratio
Cash-flow-statement-based accruals ratio1 hidden% hidden% hidden% hidden% hidden%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors
Illinois Tool Works Inc. hidden% hidden% hidden% hidden% hidden%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Industrial Engineering hidden% hidden% hidden% hidden% hidden%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials hidden% hidden% hidden% hidden% hidden%

2017 Calculations

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

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, Caterpillar Inc. deteriorated earnings quality from 2016 to 2017.