Stock Analysis on Net

Verizon Communications Inc. (NYSE:VZ)

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

Verizon Communications Inc., balance sheet computation of aggregate accruals

US$ in millions

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Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Operating Assets
Total assets 366,596  316,481  291,727  264,829  257,143 
Less: Cash and cash equivalents 2,921  22,171  2,594  2,745  2,079 
Operating assets 363,675  294,310  289,133  262,084  255,064 
Operating Liabilities
Total liabilities 283,396  247,209  228,892  210,119  212,456 
Less: Debt maturing within one year 7,443  5,889  10,777  7,190  3,453 
Less: Long-term debt, excluding maturing within one year 143,425  123,173  100,712  105,873  113,642 
Operating liabilities 132,528  118,147  117,403  97,056  95,361 
 
Net operating assets1 231,147  176,163  171,730  165,028  159,703 
Balance-sheet-based aggregate accruals2 54,984  4,433  6,702  5,325  — 
Financial Ratio
Balance-sheet-based accruals ratio3 27.00% 2.55% 3.98% 3.28%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
AT&T Inc. 3.99% -7.71% -3.41% 35.21%
T-Mobile US Inc. 7.95% 80.88% 6.57% 2.79%
Balance-Sheet-Based Accruals Ratio, Sector
Telecommunication Services 11.76% 8.64% -0.36% 22.18%
Balance-Sheet-Based Accruals Ratio, Industry
Communication Services 9.21% 6.81% 8.35% 20.64%

Based on: 10-K (reporting date: 2021-12-31), 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).

1 2021 Calculation
Net operating assets = Operating assets – Operating liabilities
= 363,675132,528 = 231,147

2 2021 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2021 – Net operating assets2020
= 231,147176,163 = 54,984

3 2021 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 54,984 ÷ [(231,147 + 176,163) ÷ 2] = 27.00%

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, Verizon Communications Inc. deteriorated earnings quality from 2020 to 2021.

Cash-Flow-Statement-Based Accruals Ratio

Verizon Communications Inc., cash flow statement computation of aggregate accruals

US$ in millions

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Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net income attributable to Verizon 22,065  17,801  19,265  15,528  30,101 
Less: Net cash provided by operating activities 39,539  41,768  35,746  34,339  25,305 
Less: Net cash used in investing activities (67,153) (23,512) (17,581) (17,934) (19,372)
Cash-flow-statement-based aggregate accruals 49,679  (455) 1,100  (877) 24,168 
Financial Ratio
Cash-flow-statement-based accruals ratio1 24.39% -0.26% 0.65% -0.54%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
AT&T Inc. 3.06% -10.23% -5.03% 12.53%
T-Mobile US Inc. 6.34% 7.80% 1.46% -0.86%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Telecommunication Services 10.19% -4.64% -2.79% 7.19%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Communication Services 5.83% -0.94% 1.88% 10.27%

Based on: 10-K (reporting date: 2021-12-31), 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).

1 2021 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 49,679 ÷ [(231,147 + 176,163) ÷ 2] = 24.39%

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, Verizon Communications Inc. deteriorated earnings quality from 2020 to 2021.