Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Ecolab Inc. (NYSE:ECL)

Financial Reporting Quality: Aggregate Accruals

Advanced level

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

Ecolab Inc., balance sheet computation of aggregate accruals

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Operating Assets
Total assets 18,126,000  20,869,100  20,074,500  19,962,400  18,330,200 
Less: Cash and cash equivalents 1,260,200  186,400  114,700  211,400  327,400 
Operating assets 16,865,800  20,682,700  19,959,800  19,751,000  18,002,800 
Operating Liabilities
Total liabilities 11,924,500  12,143,300  12,020,900  12,273,700  11,359,300 
Less: Short-term debt 17,300  380,600  743,600  564,400  541,300 
Less: Long-term debt, excluding current maturities 6,669,300  5,973,500  6,301,600  6,758,300  6,145,700 
Operating liabilities 5,237,900  5,789,200  4,975,700  4,951,000  4,672,300 
 
Net operating assets1 11,627,900  14,893,500  14,984,100  14,800,000  13,330,500 
Balance-sheet-based aggregate accruals2 (3,265,600) (90,600) 184,100  1,469,500  — 
Financial Ratio
Balance-sheet-based accruals ratio3 -24.63% -0.61% 1.24% 10.45%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Air Products & Chemicals Inc. 12.88% 2.36% 13.72% -13.09% -8.93%
Linde plc -1.46% -7.70% 128.02% 3.15%
Sherwin-Williams Co. -7.98% -2.13% -8.09% 130.59%
Balance-Sheet-Based Accruals Ratio, Sector
Chemicals -3.42% -4.85% 66.23% 23.82%
Balance-Sheet-Based Accruals Ratio, Industry
Materials -4.32% 7.48% 57.42% 16.65%

Based on: 10-K (filing date: 2021-02-26), 10-K (filing date: 2020-02-28), 10-K (filing date: 2019-03-01), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24).

1 2020 Calculation
Net operating assets = Operating assets – Operating liabilities
= 16,865,8005,237,900 = 11,627,900

2 2020 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2020 – Net operating assets2019
= 11,627,90014,893,500 = -3,265,600

3 2020 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -3,265,600 ÷ [(11,627,900 + 14,893,500) ÷ 2] = -24.63%

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, Ecolab Inc. deteriorated earnings quality from 2019 to 2020.

Cash-Flow-Statement-Based Accruals Ratio

Ecolab Inc., cash flow statement computation of aggregate accruals

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net income (loss) attributable to Ecolab (1,205,100) 1,558,900  1,429,100  1,508,400  1,229,600 
Less: Cash provided by operating activities 1,741,800  2,420,700  2,277,700  2,091,300  1,939,700 
Less: Cash used for investing activities (857,700) (1,199,100) (1,030,000) (1,673,200) (829,500)
Cash-flow-statement-based aggregate accruals (2,089,200) 337,300  181,400  1,090,300  119,400 
Financial Ratio
Cash-flow-statement-based accruals ratio1 -15.75% 2.26% 1.22% 7.75%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Air Products & Chemicals Inc. 16.60% 7.43% 5.27% 16.82% -8.84%
Linde plc -3.11% -7.68% -11.19% -3.27%
Sherwin-Williams Co. -8.68% -2.48% -4.33% 105.44%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Chemicals -2.88% -3.89% -5.49% 23.61%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Materials -4.05% -2.36% -5.10% 16.18%

Based on: 10-K (filing date: 2021-02-26), 10-K (filing date: 2020-02-28), 10-K (filing date: 2019-03-01), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24).

1 2020 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -2,089,200 ÷ [(11,627,900 + 14,893,500) ÷ 2] = -15.75%

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, Ecolab Inc. deteriorated earnings quality from 2019 to 2020.