Stock Analysis on Net

Alphabet Inc. (NASDAQ:GOOG)

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

Alphabet Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Operating Assets
Total assets 402,392 365,264 359,268 319,616 275,909
Less: Cash, cash equivalents, and marketable securities 110,916 113,762 139,649 136,694 119,675
Operating assets 291,476 251,502 219,619 182,922 156,234
Operating Liabilities
Total liabilities 119,013 109,120 107,633 97,072 74,467
Less: Current portion of long-term notes 1,000 999
Less: Current portion of future finance lease payments, net and other current debt 363 298 113 101 115
Less: Long-term debt, excluding current portion 13,253 14,701 14,817 13,932 4,554
Operating liabilities 104,397 94,121 92,703 82,040 69,798
 
Net operating assets1 187,079 157,381 126,916 100,882 86,436
Balance-sheet-based aggregate accruals2 29,698 30,465 26,034 14,446
Financial Ratio
Balance-sheet-based accruals ratio3 17.24% 21.43% 22.86% 15.42%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Comcast Corp. 1.29% -6.76% -0.48% 1.68%
Meta Platforms Inc. 11.12% 20.95% 14.69% 35.56%
Netflix Inc. -3.78% 14.21% 27.24% 10.12%
Walt Disney Co. 0.08% 3.09% 1.73% -4.26% 68.46%
Balance-Sheet-Based Accruals Ratio, Sector
Media & Entertainment 6.80% 7.77% 8.30% 6.79%
Balance-Sheet-Based Accruals Ratio, Industry
Communication Services 4.26% -3.77% 10.23% 7.81%

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
= 291,476104,397 = 187,079

2 2023 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2023 – Net operating assets2022
= 187,079157,381 = 29,698

3 2023 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 29,698 ÷ [(187,079 + 157,381) ÷ 2] = 17.24%

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, Alphabet Inc. improved earnings quality from 2022 to 2023.

Cash-Flow-Statement-Based Accruals Ratio

Alphabet Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net income 73,795 59,972 76,033 40,269 34,343
Less: Net cash provided by operating activities 101,746 91,495 91,652 65,124 54,520
Less: Net cash used in investing activities (27,063) (20,298) (35,523) (32,773) (29,491)
Cash-flow-statement-based aggregate accruals (888) (11,225) 19,904 7,918 9,314
Financial Ratio
Cash-flow-statement-based accruals ratio1 -0.52% -7.90% 17.48% 8.45%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Comcast Corp. -3.44% -3.88% -0.83% -1.17%
Meta Platforms Inc. -7.43% 1.96% -14.89% 36.04%
Netflix Inc. -8.44% 16.73% 27.32% 4.60%
Walt Disney Co. -1.97% 1.50% -0.29% -4.68% 18.72%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Media & Entertainment -3.16% -1.69% 2.49% 4.14%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Communication Services -2.47% -1.31% 6.79% -0.70%

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 × -888 ÷ [(187,079 + 157,381) ÷ 2] = -0.52%

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, Alphabet Inc. improved earnings quality from 2022 to 2023.