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

Honeywell International Inc. (NYSE:HON)

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

Honeywell International Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Operating Assets
Total assets 64,586  58,679  57,773  59,387  54,146 
Less: Cash and cash equivalents 14,275  9,067  9,287  7,059  7,843 
Less: Short-term investments 945  1,349  1,623  3,758  1,520 
Operating assets 49,366  48,263  46,863  48,570  44,783 
Operating Liabilities
Total liabilities 46,789  39,966  39,408  41,943  34,596 
Less: Commercial paper and other short-term borrowings 3,597  3,516  3,586  3,958  3,366 
Less: Current maturities of long-term debt 2,445  1,376  2,872  1,351  227 
Less: Long-term debt, excluding current maturities 16,342  11,110  9,756  12,573  12,182 
Operating liabilities 24,405  23,964  23,194  24,061  18,821 
 
Net operating assets1 24,961  24,299  23,669  24,509  25,962 
Balance-sheet-based aggregate accruals2 662  630  (840) (1,453) — 
Financial Ratio
Balance-sheet-based accruals ratio3 2.69% 2.63% -3.49% -5.76%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
3M Co. -4.80% 27.47% -0.87% 10.50%
General Electric Co. -8.79% -52.01% -32.87% 4.68%
Balance-Sheet-Based Accruals Ratio, Sector
General Industrials -5.61% -30.08% -25.81% 4.02%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials 4.26% -6.11% 1.08% 10.08%

Based on: 10-K (filing date: 2021-02-12), 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10).

1 2020 Calculation
Net operating assets = Operating assets – Operating liabilities
= 49,36624,405 = 24,961

2 2020 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2020 – Net operating assets2019
= 24,96124,299 = 662

3 2020 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 662 ÷ [(24,961 + 24,299) ÷ 2] = 2.69%

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, Honeywell International Inc. deteriorated earnings quality from 2019 to 2020.

Cash-Flow-Statement-Based Accruals Ratio

Honeywell International Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net income attributable to Honeywell 4,779  6,143  6,765  1,655  4,809 
Less: Net cash provided by operating activities 6,208  6,897  6,434  5,966  5,498 
Less: Net cash (used for) provided by investing activities (987) (533) 1,027  (3,574) (3,342)
Cash-flow-statement-based aggregate accruals (442) (221) (696) (737) 2,653 
Financial Ratio
Cash-flow-statement-based accruals ratio1 -1.79% -0.92% -2.89% -2.92%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
3M Co. -7.83% 15.95% -6.12% 8.34%
General Electric Co. -20.57% -25.92% -29.70% -12.23%
Cash-Flow-Statement-Based Accruals Ratio, Sector
General Industrials -13.99% -14.97% -23.87% -9.23%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials -2.31% -2.60% -2.05% 0.01%

Based on: 10-K (filing date: 2021-02-12), 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10).

1 2020 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -442 ÷ [(24,961 + 24,299) ÷ 2] = -1.79%

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, Honeywell International Inc. deteriorated earnings quality from 2019 to 2020.