Microsoft Excel LibreOffice Calc

Thermo Fisher Scientific Inc. (TMO)


Financial Reporting Quality: Aggregate Accruals

Difficulty: Advanced

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

Thermo Fisher Scientific Inc., balance sheet computation of aggregate accruals

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Operating Assets
Total assets 56,232  56,669  45,908  40,889  42,852 
Less: Cash and cash equivalents 2,103  1,335  786  452  1,344 
Operating assets 54,129  55,334  45,121  40,437  41,509 
Operating Liabilities
Total liabilities 28,646  31,256  24,368  19,539  22,304 
Less: Short-term obligations and current maturities of long-term obligations 1,271  2,135  1,256  1,053  2,212 
Less: Long-term obligations, excluding current maturities 17,719  18,873  15,372  11,474  12,352 
Operating liabilities 9,656  10,248  7,740  7,012  7,740 
Net operating assets1 44,473  45,086  37,381  33,425  33,769 
Balance-sheet-based aggregate accruals2 (613) 7,705  3,956  (344)
Ratio
Balance-sheet-based accruals ratio3 -1.37% 18.69% 11.17% -1.02%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Becton, Dickinson & Co. 80.26% 0.01% -5.12% 98.81% -1.99%
Intuitive Surgical Inc. 26.86% -15.26% 15.49% 24.98%
Medtronic PLC -7.08% -0.74% 1.04% 121.30%
Stryker Corp. 21.55% 9.67% 42.96% 11.06%
UnitedHealth Group Inc. 13.95% 13.02% 9.15% 26.14%
Balance-Sheet-Based Accruals Ratio, Sector
Health Care Equipment & Services 13.97% 7.81% 7.23% 53.16%
Balance-Sheet-Based Accruals Ratio, Industry
Health Care -1.89% 7.94% 0.81% 35.33%

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

1 2018 Calculation
Net operating assets = Operating assets – Operating liabilities
= 54,1299,656 = 44,473

2 2018 Calculation
Balance-sheet-based aggregate accruals = Net operating assets 2018 – Net operating assets 2017
= 44,47345,086 = -613

3 2018 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -613 ÷ [(44,473 + 45,086) ÷ 2] = -1.37%

4 Click competitor name to see calculations.

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, Thermo Fisher Scientific Inc. improved earnings quality from 2017 to 2018.

Cash-Flow-Statement-Based Accruals Ratio

Thermo Fisher Scientific Inc., cash flow statement computation of aggregate accruals

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income 2,938  2,225  2,022  1,975  1,894 
Less: Net cash provided by operating activities 4,543  4,006  3,158  2,826  2,624 
Less: Net cash used in investing activities (1,253) (7,729) (5,532) (1,087) (11,783)
Cash-flow-statement-based aggregate accruals (352) 5,948  4,396  237  11,053 
Ratio
Cash-flow-statement-based accruals ratio1 -0.79% 14.43% 12.42% 0.71%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Becton, Dickinson & Co. 45.11% -3.22% -5.06% 58.68% 6.10%
Intuitive Surgical Inc. 31.54% -28.80% 32.51% 27.16%
Medtronic PLC -10.98% -1.82% -5.58% 34.07%
Stryker Corp. 23.53% 7.81% 37.39% -17.68%
UnitedHealth Group Inc. 11.81% 8.68% 11.49% 29.94%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Health Care Equipment & Services 8.08% 4.70% 5.71% 24.32%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Health Care -8.00% -0.19% 2.89% 18.47%

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

1 2018 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -352 ÷ [(44,473 + 45,086) ÷ 2] = -0.79%

2 Click competitor name to see calculations.

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, Thermo Fisher Scientific Inc. improved earnings quality from 2017 to 2018.