Stock Analysis on Net

General Electric Co. (NYSE:GE)

Financial Reporting Quality: Aggregate Accruals

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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

General Electric Co., balance sheet computation of aggregate accruals

US$ in millions

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Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Operating Assets
Total assets 163,045 187,788 198,874 253,452 266,048
Less: Cash, cash equivalents and restricted cash 16,967 17,262 15,770 36,630 36,394
Less: Investment securities 5,706 7,609 12,297 7,319 9,888
Operating assets 140,372 162,917 170,807 209,503 219,766
Operating Liabilities
Total liabilities 134,466 150,206 157,262 216,378 236,187
Less: Short-term borrowings 1,253 3,757 4,361 4,778 23,727
Less: Long-term borrowings 19,711 28,593 30,824 70,288 67,155
Operating liabilities 113,502 117,856 122,077 141,312 145,305
 
Net operating assets1 26,870 45,061 48,730 68,191 74,461
Balance-sheet-based aggregate accruals2 (18,191) (3,669) (19,461) (6,270)
Financial Ratio
Balance-sheet-based accruals ratio3 -50.58% -7.82% -33.29% -8.79%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Boeing Co. -22.39% -12.09% 30.23% 75.78%
Caterpillar Inc. 9.40% 1.82% 4.22% -1.86%
Cummins Inc. -11.22% 39.68% 11.00% -0.76%
Honeywell International Inc. 7.21% -1.99% 9.04% 2.69%
Lockheed Martin Corp. 2.60% 15.67% 23.38% 5.01%
RTX Corp. -1.23% 1.57% 1.48% 18.38%
Balance-Sheet-Based Accruals Ratio, Sector
Capital Goods -6.95% 1.25% -0.59% 8.06%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials -2.64% 1.22% 3.53% 6.45%

Based on: 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), 10-K (reporting date: 2019-12-31).

1 2023 Calculation
Net operating assets = Operating assets – Operating liabilities
= 140,372113,502 = 26,870

2 2023 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2023 – Net operating assets2022
= 26,87045,061 = -18,191

3 2023 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -18,191 ÷ [(26,870 + 45,061) ÷ 2] = -50.58%

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, General Electric Co. deteriorated earnings quality from 2022 to 2023.

Cash-Flow-Statement-Based Accruals Ratio

General Electric Co., cash flow statement computation of aggregate accruals

US$ in millions

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Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net earnings (loss) attributable to the Company 9,481 225 (6,520) 5,704 (4,979)
Less: Cash from operating activities 5,570 5,864 888 3,597 10,419
Less: Cash from investing activities 6,938 1,825 23,705 16,778 10,684
Cash-flow-statement-based aggregate accruals (3,027) (7,464) (31,113) (14,671) (26,082)
Financial Ratio
Cash-flow-statement-based accruals ratio1 -8.42% -15.92% -53.22% -20.57%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Boeing Co. -26.69% -50.32% -43.09% 172.40%
Caterpillar Inc. 6.90% 3.26% 5.38% -4.23%
Cummins Inc. -10.82% 33.70% 7.61% -2.29%
Honeywell International Inc. 5.80% -0.79% 2.16% -1.79%
Lockheed Martin Corp. 3.08% -1.36% -10.24% 4.50%
RTX Corp. -1.66% 0.87% -1.96% -12.62%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Capital Goods -2.36% -5.07% -14.89% -1.05%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials 0.43% -3.80% -9.37% -1.67%

Based on: 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), 10-K (reporting date: 2019-12-31).

1 2023 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -3,027 ÷ [(26,870 + 45,061) ÷ 2] = -8.42%

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, General Electric Co. improved earnings quality from 2022 to 2023.