Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Caterpillar Inc. (NYSE:CAT)

Financial Reporting Quality: Aggregate Accruals

Advanced level

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

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Operating Assets
Total assets 78,453  78,509  76,962  74,704  78,497 
Less: Cash and short-term investments 8,284  7,857  8,261  7,168  6,460 
Operating assets 70,169  70,652  68,701  67,536  72,037 
Operating Liabilities
Total liabilities 63,824  64,429  63,196  61,491  63,612 
Less: Short-term borrowings 5,166  5,723  4,837  7,303  6,967 
Less: Long-term debt due within one year 6,210  5,830  6,194  6,662  5,879 
Less: Long-term debt due after one year 26,281  25,000  23,847  22,818  25,247 
Operating liabilities 26,167  27,876  28,318  24,708  25,519 
 
Net operating assets1 44,002  42,776  40,383  42,828  46,518 
Balance-sheet-based aggregate accruals2 1,226  2,393  (2,445) (3,690)
Financial Ratio
Balance-sheet-based accruals ratio3 2.83% 5.76% -5.88% -8.26%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Illinois Tool Works Inc. -3.65% -7.27% 2.13% 0.58%
Balance-Sheet-Based Accruals Ratio, Sector
Industrial Engineering 1.72% 3.34% -4.36% -6.70%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials -6.94% 4.18% 11.88% -14.98%

Based on: 10-K (filing date: 2020-02-19), 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16).

1 2019 Calculation
Net operating assets = Operating assets – Operating liabilities
= 70,16926,167 = 44,002

2 2019 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2019 – Net operating assets2018
= 44,00242,776 = 1,226

3 2019 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,226 ÷ [(44,002 + 42,776) ÷ 2] = 2.83%

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, Caterpillar Inc. improved earnings quality from 2018 to 2019.

Cash-Flow-Statement-Based Accruals Ratio

Caterpillar Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Profit (loss) attributable to common stockholders 6,093  6,147  754  (67) 2,102 
Less: Net cash provided by operating activities 6,912  6,558  5,702  5,608  6,675 
Less: Net cash used for investing activities (1,928) (3,212) (994) (1,760) (3,517)
Cash-flow-statement-based aggregate accruals 1,109  2,801  (3,954) (3,915) (1,056)
Financial Ratio
Cash-flow-statement-based accruals ratio1 2.56% 6.74% -9.50% -8.76%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Illinois Tool Works Inc. -3.24% 0.81% -4.77% 2.76%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Industrial Engineering 1.56% 5.64% -8.61% -6.73%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials -2.37% -0.07% -0.02% -9.28%

Based on: 10-K (filing date: 2020-02-19), 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16).

1 2019 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,109 ÷ [(44,002 + 42,776) ÷ 2] = 2.56%

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, Caterpillar Inc. improved earnings quality from 2018 to 2019.