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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- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Net Profit Margin since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
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Balance-Sheet-Based Accruals Ratio
Ford Motor Co., balance sheet computation of aggregate accruals
US$ in millions
| 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: Marketable securities | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Less: Debt payable within one year | ||||||
| Less: Long-term debt payable after one year | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| General Motors Co. | ||||||
| Tesla Inc. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Automobiles & Components | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Consumer Discretionary | ||||||
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.
The data reveals several important trends in the financial reporting quality measures over the four-year period.
- Net Operating Assets
- There is a consistent upward trend in net operating assets, increasing steadily from $137,121 million in 2021 to $165,032 million in 2024. This represents a growth of approximately 20.3% over the period, indicating an expansion in the firm's operating asset base.
- Balance-Sheet-Based Aggregate Accruals
- The aggregate accruals exhibit significant volatility. In 2021, aggregate accruals were negative at -$5,413 million, shifted to a small positive value of $945 million in 2022, and then increased sharply to $13,792 million in 2023 and slightly decreased to $13,174 million in 2024. This sharp rise from 2022 to 2023 suggests an increased impact of accruals on the balance sheet, potentially reflecting changing accounting practices or operational conditions.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio follows a similar pattern to aggregate accruals. It moves from a negative -3.87% in 2021 to a marginal positive 0.69% in 2022, then experiences a pronounced increase to 9.51% in 2023, and slightly declines to 8.31% in 2024. The magnitude of this ratio indicates a substantial rise in accruals relative to net operating assets in the latter years.
Overall, the data suggests a growing base of net operating assets accompanied by an increasing proportion and magnitude of accruals starting from 2022, peaking in 2023, and slightly retreating in 2024. The expansion in accruals ratio could indicate heightened earnings management or changes in asset recognition timing, which may affect the quality and sustainability of reported earnings. The trends warrant close monitoring to understand their drivers and assess their implications for financial statement reliability.
Cash-Flow-Statement-Based Accruals Ratio
Ford Motor Co., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Net income (loss) attributable to Ford Motor 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 | ||||||
| General Motors Co. | ||||||
| Tesla Inc. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Automobiles & Components | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Consumer Discretionary | ||||||
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 exhibit a consistent upward trend over the four-year period. Starting at 137,121 million US dollars in 2021, the figure slightly increased to 138,066 million in 2022. This was followed by more pronounced growth in 2023 and 2024, reaching 151,858 million and eventually 165,032 million US dollars. Overall, this indicates a steady expansion in operational asset base.
- Cash-flow-statement-based Aggregate Accruals
- The aggregate accruals present notable volatility with a marked shift from negative to positive values over the period. Initially, there was a modest negative accrual of -595 million US dollars in 2021, which deepened considerably to -4,487 million in 2022. However, this trend reversed sharply starting in 2023, with positive accruals of 7,057 million, followed by a substantial increase to 14,826 million in 2024. This change implies a shift in accrual accounting treatment or operational cash flow dynamics over time.
- Cash-flow-statement-based Accruals Ratio
- The accruals ratio mirrors the aggregate accruals pattern, transitioning from negative to positive values. It started at -0.43% in 2021, declined further to -3.26% in 2022, indicating higher accruals relative to cash flows. Subsequently, it rose sharply to 4.87% in 2023 and 9.36% in 2024, denoting increased accruals proportionate to cash flows. This upward trend may raise considerations regarding the quality of earnings and the reliance on accrual accounting over cash-based results.