Stock Analysis on Net

Schlumberger Ltd. (NYSE:SLB)

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.


Balance-Sheet-Based Accruals Ratio

Schlumberger Ltd., 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 47,957 43,135 41,511 42,434 56,312
Less: Cash 2,900 1,655 1,757 844 1,137
Less: Short-term investments 1,089 1,239 1,382 2,162 1,030
Operating assets 43,968 40,241 38,372 39,428 54,145
Operating Liabilities
Total liabilities 26,598 25,146 26,225 29,945 32,136
Less: Short-term borrowings and current portion of long-term debt 1,123 1,632 909 850 524
Less: Long-term debt, excluding current portion 10,842 10,594 13,286 16,036 14,770
Operating liabilities 14,633 12,920 12,030 13,059 16,842
 
Net operating assets1 29,335 27,321 26,342 26,369 37,303
Balance-sheet-based aggregate accruals2 2,014 979 (27) (10,934)
Financial Ratio
Balance-sheet-based accruals ratio3 7.11% 3.65% -0.10% -34.34%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Industry
Energy 4.34% 0.29% -0.47% -7.53%

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
= 43,96814,633 = 29,335

2 2023 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2023 – Net operating assets2022
= 29,33527,321 = 2,014

3 2023 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 2,014 ÷ [(29,335 + 27,321) ÷ 2] = 7.11%

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, Schlumberger Ltd. deteriorated earnings quality from 2022 to 2023.

Cash-Flow-Statement-Based Accruals Ratio

Schlumberger Ltd., 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 income (loss) attributable to SLB 4,203 3,441 1,881 (10,518) (10,137)
Less: Net cash provided by operating activities 6,637 3,720 4,651 2,944 5,431
Less: Net cash used in investing activities (2,783) (1,388) (919) (2,353) (2,011)
Cash-flow-statement-based aggregate accruals 349 1,109 (1,851) (11,109) (13,557)
Financial Ratio
Cash-flow-statement-based accruals ratio1 1.23% 4.13% -7.02% -34.89%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Industry
Energy 0.77% -1.19% -4.76% -10.60%

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 × 349 ÷ [(29,335 + 27,321) ÷ 2] = 1.23%

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, Schlumberger Ltd. improved earnings quality from 2022 to 2023.