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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Chipotle Mexican Grill Inc. pages available for free this week:
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
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Balance-Sheet-Based Accruals Ratio
Chipotle Mexican Grill Inc., balance sheet computation of aggregate accruals
US$ in thousands
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | ||||||
| Less: Cash and cash equivalents | ||||||
| Less: Current investments | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| DoorDash, Inc. | ||||||
| McDonald’s Corp. | ||||||
| Starbucks Corp. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Consumer Services | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Consumer Discretionary | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= – =
3 2025 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.
The balance-sheet-based accruals ratio exhibited a fluctuating pattern over the four-year period. Net operating assets demonstrated a general upward trend initially, followed by a decrease in the final year. Aggregate accruals mirrored this volatility, shifting from positive values to a substantial negative value.
- Net Operating Assets
- Net operating assets increased from US$1,468,887 thousand in 2022 to US$1,766,760 thousand in 2023, representing a growth of approximately 20.2%. This upward trajectory continued into 2024, reaching US$2,232,631 thousand. However, a notable decline occurred in 2025, with net operating assets decreasing to US$1,781,471 thousand.
- Balance-Sheet-Based Aggregate Accruals
- Balance-sheet-based aggregate accruals were US$247,832 thousand in 2022 and increased to US$297,873 thousand in 2023. The value continued to rise significantly in 2024, reaching US$465,871 thousand. A dramatic shift occurred in 2025, with aggregate accruals becoming negative at -US$451,160 thousand.
- Balance-Sheet-Based Accruals Ratio
- The balance-sheet-based accruals ratio remained relatively stable between 2022 and 2023, at 18.43% and 18.41% respectively. An increase was observed in 2024, with the ratio rising to 23.30%. The most significant change occurred in 2025, where the ratio decreased substantially to -22.48%. This negative value suggests a reversal of accruals and potentially a reduction in earnings quality, or a significant cash inflow relative to reported earnings.
The substantial negative accruals ratio in 2025 warrants further investigation. The combination of decreasing net operating assets and negative accruals could indicate a potential shift in the company’s financial performance or accounting practices. The prior increases in accruals, followed by a large reversal, should be examined to understand the underlying drivers and assess any potential impact on the reliability of reported earnings.
Cash-Flow-Statement-Based Accruals Ratio
Chipotle Mexican Grill Inc., cash flow statement computation of aggregate accruals
US$ in thousands
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Net income | ||||||
| Less: Net cash provided by operating activities | ||||||
| Less: Net cash used in investing activities | ||||||
| Cash-flow-statement-based aggregate accruals | ||||||
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | ||||||
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| DoorDash, Inc. | ||||||
| McDonald’s Corp. | ||||||
| Starbucks Corp. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Consumer Services | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Consumer Discretionary | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 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.
The information presents a review of net operating assets, cash-flow-statement-based aggregate accruals, and the resulting accruals ratio over a four-year period. Net operating assets demonstrate an overall increasing trend, though with a recent decline. Aggregate accruals initially decreased, then continued to decline significantly, culminating in a negative value. Consequently, the cash-flow-statement-based accruals ratio exhibits a marked downward trajectory, transitioning to a negative value in the final year.
- Net Operating Assets
- Net operating assets increased from US$1,468,887 thousand in 2022 to US$1,766,760 thousand in 2023, representing growth of approximately 20.2%. Further growth was observed in 2024, reaching US$2,232,631 thousand. However, a decrease to US$1,781,471 thousand was recorded in 2025, indicating a potential reversal in asset growth.
- Cash-Flow-Statement-Based Aggregate Accruals
- Aggregate accruals began at US$405,954 thousand in 2022 and decreased to US$391,269 thousand in 2023, a reduction of roughly 3.8%. This downward trend continued in 2024, with accruals falling to US$266,560 thousand. A substantial shift occurred in 2025, as accruals became negative, reaching -US$543,083 thousand. This indicates a significant outflow related to accruals, potentially stemming from changes in working capital or other non-cash items.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio, calculated as aggregate accruals divided by net operating assets, started at 30.18% in 2022. It decreased to 24.18% in 2023 and further to 13.33% in 2024, reflecting the declining accruals relative to assets. The most notable change occurred in 2025, where the ratio became negative at -27.06%. This suggests that cash flows are increasingly less reliant on accruals and may be driven more by actual cash generation, or conversely, that accruals are actively reducing reported income.
The progression from positive and decreasing accruals to negative accruals, and the corresponding shift in the accruals ratio, warrants further investigation. The negative accruals in 2025 could be due to various factors, including aggressive working capital management, significant write-downs, or changes in revenue recognition practices. The decline in net operating assets in the same period should also be considered in conjunction with the accruals trend.