Stock Analysis on Net

Coca-Cola Co. (NYSE:KO)

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

Coca-Cola Co., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Operating Assets
Total assets 94,354 87,296 86,381 83,216 87,896
Less: Cash and cash equivalents 9,684 6,795 6,480 8,926 6,006
Less: Short-term investments 1,242 1,771 1,467 2,025 9,352
Less: Marketable securities 1,699 2,348 3,228 5,013 5,317
Operating assets 81,729 76,382 75,206 67,252 67,221
Operating Liabilities
Total liabilities 69,494 66,012 65,283 64,158 68,919
Less: Loans and notes payable 3,307 2,183 10,994 13,194 13,205
Less: Current maturities of long-term debt 1,338 485 4,253 4,997 3,298
Less: Long-term debt, excluding current maturities 38,116 40,125 27,516 25,364 31,182
Operating liabilities 26,733 23,219 22,520 20,603 21,234
 
Net operating assets1 54,996 53,163 52,686 46,649 45,987
Balance-sheet-based aggregate accruals2 1,833 477 6,037 662
Financial Ratio
Balance-sheet-based accruals ratio3 3.39% 0.90% 12.15% 1.43%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Mondelēz International Inc. 0.47% -0.91% 3.43% -0.23%
PepsiCo Inc. 4.76% 15.56% 13.65% 15.54%
Philip Morris International Inc. 10.28% -6.81% 1.09% -8.21%
Balance-Sheet-Based Accruals Ratio, Sector
Food, Beverage & Tobacco 3.62% 3.89% 8.85% 3.28%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Staples 0.45% 0.28% 5.07% 1.76%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 2021 Calculation
Net operating assets = Operating assets – Operating liabilities
= 81,72926,733 = 54,996

2 2021 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2021 – Net operating assets2020
= 54,99653,163 = 1,833

3 2021 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,833 ÷ [(54,996 + 53,163) ÷ 2] = 3.39%

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, Coca-Cola Co. deteriorated earnings quality from 2020 to 2021.

Cash-Flow-Statement-Based Accruals Ratio

Coca-Cola Co., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net income attributable to shareowners of The Coca-Cola Company 9,771 7,747 8,920 6,434 1,248
Less: Net cash provided by operating activities 12,625 9,844 10,471 7,320 6,995
Less: Net cash (used in) provided by investing activities (2,765) (1,477) (3,976) 6,348 (2,385)
Cash-flow-statement-based aggregate accruals (89) (620) 2,425 (7,234) (3,362)
Financial Ratio
Cash-flow-statement-based accruals ratio1 -0.16% -1.17% 4.88% -15.62%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Mondelēz International Inc. 0.42% -2.05% 1.98% 1.53%
PepsiCo Inc. -1.48% 18.19% 10.64% -4.39%
Philip Morris International Inc. -3.48% -4.27% -7.54% -3.78%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Food, Beverage & Tobacco -0.70% 3.84% 4.30% -6.25%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Staples -4.18% -1.00% 0.44% -5.64%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 2021 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -89 ÷ [(54,996 + 53,163) ÷ 2] = -0.16%

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, Coca-Cola Co. improved earnings quality from 2020 to 2021.