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
Altria Group Inc. -22.67% -16.03% -19.46% 33.23%
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 0.14% 0.69% 3.29% 9.16%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Staples -1.01% -0.96% 2.82% 4.57%

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
Altria Group Inc. -28.92% -12.63% -18.82% 34.35%
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 -4.43% 1.19% -0.24% 1.72%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Staples -5.74% -1.88% -1.32% -2.06%

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.