Stock Analysis on Net

Caterpillar Inc. (NYSE:CAT)

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.


Balance-Sheet-Based Accruals Ratio

Caterpillar Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Operating Assets
Total assets 87,476 81,943 82,793 78,324 78,453
Less: Cash and cash equivalents 6,978 7,004 9,254 9,352 8,284
Operating assets 80,498 74,939 73,539 68,972 70,169
Operating Liabilities
Total liabilities 67,973 66,052 66,277 62,946 63,824
Less: Short-term borrowings 4,643 5,957 5,404 2,015 5,166
Less: Long-term debt due within one year 8,763 5,322 6,352 9,149 6,210
Less: Long-term debt due after one year 24,472 25,714 26,033 25,999 26,281
Operating liabilities 30,095 29,059 28,488 25,783 26,167
 
Net operating assets1 50,403 45,880 45,051 43,189 44,002
Balance-sheet-based aggregate accruals2 4,523 829 1,862 (813)
Financial Ratio
Balance-sheet-based accruals ratio3 9.40% 1.82% 4.22% -1.86%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Boeing Co. -22.39% -12.09% 30.23% 75.78%
Cummins Inc. -11.22% 39.68% 11.00% -0.76%
General Electric Co. -50.58% -7.82% -33.29% -8.79%
Honeywell International Inc. 7.21% -1.99% 9.04% 2.69%
Lockheed Martin Corp. 2.60% 15.67% 23.38% 5.01%
RTX Corp. -1.23% 1.57% 1.48% 18.38%
Balance-Sheet-Based Accruals Ratio, Sector
Capital Goods -6.95% 1.25% -0.59% 8.06%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials -2.64% 1.22% 3.53% 6.45%

Based on: 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), 10-K (reporting date: 2019-12-31).

1 2023 Calculation
Net operating assets = Operating assets – Operating liabilities
= 80,49830,095 = 50,403

2 2023 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2023 – Net operating assets2022
= 50,40345,880 = 4,523

3 2023 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 4,523 ÷ [(50,403 + 45,880) ÷ 2] = 9.40%

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. deteriorated earnings quality from 2022 to 2023.

Cash-Flow-Statement-Based Accruals Ratio

Caterpillar Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Profit attributable to common stockholders 10,335 6,705 6,489 2,998 6,093
Less: Net cash provided by operating activities 12,885 7,766 7,198 6,327 6,912
Less: Net cash used for investing activities (5,871) (2,541) (3,084) (1,485) (1,928)
Cash-flow-statement-based aggregate accruals 3,321 1,480 2,375 (1,844) 1,109
Financial Ratio
Cash-flow-statement-based accruals ratio1 6.90% 3.26% 5.38% -4.23%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Boeing Co. -26.69% -50.32% -43.09% 172.40%
Cummins Inc. -10.82% 33.70% 7.61% -2.29%
General Electric Co. -8.42% -15.92% -53.22% -20.57%
Honeywell International Inc. 5.80% -0.79% 2.16% -1.79%
Lockheed Martin Corp. 3.08% -1.36% -10.24% 4.50%
RTX Corp. -1.66% 0.87% -1.96% -12.62%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Capital Goods -2.36% -5.07% -14.89% -1.05%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials 0.43% -3.80% -9.37% -1.67%

Based on: 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), 10-K (reporting date: 2019-12-31).

1 2023 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 3,321 ÷ [(50,403 + 45,880) ÷ 2] = 6.90%

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. deteriorated earnings quality from 2022 to 2023.