Stock Analysis on Net

United Parcel Service Inc. (NYSE:UPS)

Financial Reporting Quality: Aggregate Accruals

Microsoft Excel LibreOffice Calc

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

United Parcel Service 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 62,408  57,857  50,016  45,403  40,377 
Less: Cash and cash equivalents 5,910  5,238  4,225  3,320  3,476 
Less: Marketable securities 406  503  810  749  1,091 
Operating assets 56,092  52,116  44,981  41,334  35,810 
Operating Liabilities
Total liabilities 61,739  54,574  46,979  44,373  39,948 
Less: Current maturities of long-term debt, commercial paper and finance leases 2,623  3,420  2,805  4,011  3,681 
Less: Long-term debt and finance leases, excluding current maturities 22,031  21,818  19,931  20,278  12,394 
Operating liabilities 37,085  29,336  24,243  20,084  23,873 
 
Net operating assets1 19,007  22,780  20,738  21,250  11,937 
Balance-sheet-based aggregate accruals2 (3,773) 2,042  (512) 9,313  — 
Financial Ratio
Balance-sheet-based accruals ratio3 -18.06% 9.38% -2.44% 56.12%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
CSX Corp. 2.03% -0.30% 0.44% 17.24%
FedEx Corp. 7.01% 0.86% 19.08% 11.41%
Norfolk Southern Corp. -1.67% 2.46% 2.49% 16.28%
Union Pacific Corp. -1.44% 2.28% 2.48% 18.50%
Balance-Sheet-Based Accruals Ratio, Sector
Transportation -1.26% 2.58% 4.84% 21.34%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials 4.75% -7.68% -0.68% 7.57%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 2020 Calculation
Net operating assets = Operating assets – Operating liabilities
= 56,09237,085 = 19,007

2 2020 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2020 – Net operating assets2019
= 19,00722,780 = -3,773

3 2020 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -3,773 ÷ [(19,007 + 22,780) ÷ 2] = -18.06%

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, United Parcel Service Inc. deteriorated earnings quality from 2019 to 2020.

Cash-Flow-Statement-Based Accruals Ratio

United Parcel Service 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 1,343  4,440  4,791  4,910  3,431 
Less: Net cash from operating activities 10,459  8,639  12,711  1,479  6,473 
Less: Net cash used in investing activities (5,283) (6,061) (6,330) (4,975) (2,566)
Cash-flow-statement-based aggregate accruals (3,833) 1,862  (1,590) 8,406  (476)
Financial Ratio
Cash-flow-statement-based accruals ratio1 -18.35% 8.56% -7.57% 50.66%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
CSX Corp. -3.21% 2.23% 1.35% 14.53%
FedEx Corp. 5.95% 1.22% 18.65% 11.92%
Norfolk Southern Corp. -1.69% 2.24% 2.32% 15.40%
Union Pacific Corp. -1.22% 1.77% 1.68% 17.71%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Transportation -2.40% 2.80% 3.91% 19.82%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials -1.27% -2.97% -3.96% -0.79%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 2020 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -3,833 ÷ [(19,007 + 22,780) ÷ 2] = -18.35%

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, United Parcel Service Inc. deteriorated earnings quality from 2019 to 2020.