Stock Analysis on Net

Coca-Cola Co. (NYSE:KO)

$24.99

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.

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Balance-Sheet-Based Accruals Ratio

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

US$ in millions

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Operating Assets
Total assets
Less: Cash and cash equivalents
Less: Short-term investments
Less: Marketable securities
Operating assets
Operating Liabilities
Total liabilities
Less: Loans and notes payable
Less: Current maturities of long-term debt
Less: Long-term debt, excluding current maturities
Operating liabilities
 
Net operating assets1
Balance-sheet-based aggregate accruals2
Financial Ratio
Balance-sheet-based accruals ratio3
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Mondelēz International Inc.
PepsiCo Inc.
Philip Morris International Inc.
Balance-Sheet-Based Accruals Ratio, Sector
Food, Beverage & Tobacco
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Staples

Based on: 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), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= =

2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= =

3 2024 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.


Net operating assets
The net operating assets exhibited a slight decline from 54,996 million US dollars at the end of 2021 to 53,344 million US dollars in 2022, reflecting a reduction in the asset base. However, in the subsequent years, there was a gradual recovery, with values increasing to 55,881 million in 2023 and further to 56,323 million in 2024. Overall, the trend indicates a minor contraction followed by a steady expansion in the net operating assets over the four-year period.
Balance-sheet-based aggregate accruals
The aggregate accruals demonstrated considerable volatility during the period under review. Starting at 1,833 million US dollars in 2021, the figure dropped substantially to a negative value of -1,652 million in 2022, indicating a reversal or reduction of accruals. There was a significant positive rebound in 2023, with aggregate accruals increasing to 2,537 million US dollars, before declining again to 442 million in 2024. This fluctuation suggests episodic changes in non-cash accounting adjustments affecting net income.
Balance-sheet-based accruals ratio
The accruals ratio paralleled the movements seen in aggregate accruals, beginning at 3.39% in 2021 and turning negative at -3.05% in 2022. The ratio then spiked to 4.65% in 2023, indicating a relatively higher level of accruals relative to net operating assets. This was followed by a notable decrease to 0.79% in 2024. This pattern reinforces the observation of volatility in accruals, with significant swings between positive and negative values impacting the financial reporting quality indicator.

Cash-Flow-Statement-Based Accruals Ratio

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

US$ in millions

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net income attributable to shareowners of The Coca-Cola Company
Less: Net cash provided by operating activities
Less: Net cash (used in) provided by investing activities
Cash-flow-statement-based aggregate accruals
Financial Ratio
Cash-flow-statement-based accruals ratio1
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Mondelēz International Inc.
PepsiCo Inc.
Philip Morris International Inc.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Food, Beverage & Tobacco
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Staples

Based on: 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), 10-K (reporting date: 2020-12-31).

1 2024 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.


Net Operating Assets
The net operating assets showed a slight fluctuation over the reported periods. Beginning at 54,996 million US dollars at the end of 2021, there was a minor decrease to 53,344 million in 2022. Subsequently, the value increased over the next two years, reaching 55,881 million in 2023 and 56,323 million in 2024. Overall, the net operating assets exhibited a tendency for recovery and gradual growth following the initial dip in 2022.
Cash-flow-statement-based Aggregate Accruals
This measure demonstrated considerable variability during the examined periods. Starting at a small negative amount of -89 million US dollars in 2021, the figure declined markedly to -713 million in 2022, indicating increased negative accruals. In contrast, 2023 and 2024 registered notable positive values of 2,464 million and 1,302 million, respectively. This shift from negative to positive accruals suggests a significant improvement in cash-flow-related adjustments over time, although there was a reduction in the positive figure in 2024 compared to 2023.
Cash-flow-statement-based Accruals Ratio
The accruals ratio followed a pattern consistent with the aggregate accruals. It was negative at -0.16% in 2021 and dropped further to -1.32% in 2022, indicating increased proportionate negative accruals relative to net operating assets. The ratio then shifted to a positive range in 2023 at 4.51%, followed by a decline to 2.32% in 2024. This trend reflects an overall improvement in accrual quality, with a notable peak in 2023 before a reduction in 2024, suggesting some volatility in accrual management or cash flow adjustments in recent years.