Financial Reporting Quality: Aggregate Accruals
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
Cytokinetics Inc., balance sheet computation of aggregate accruals
US$ in thousands
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | 1,014,775) | 841,319) | 533,803) | 289,814) | 211,178) | |
| Less: Cash and cash equivalents | 65,582) | 112,666) | 82,985) | 36,433) | 42,256) | |
| Less: Short-term investments | 716,995) | 358,972) | 381,075) | 188,679) | 156,475) | |
| Operating assets | 232,198) | 369,681) | 69,743) | 64,702) | 12,447) | |
| Operating Liabilities | ||||||
| Total liabilities | 1,122,675) | 597,456) | 420,420) | 300,751) | 185,244) | |
| Less: Current portion of term loan | —) | —) | —) | —) | 2,607) | |
| Less: Short-term finance lease liabilities | 1,000) | 500) | —) | —) | —) | |
| Less: Term loan, net, excluding current portion | 63,810) | 47,367) | 46,209) | 45,052) | 39,806) | |
| Less: Convertible notes, net | 545,808) | 95,471) | 89,504) | 84,205) | —) | |
| Less: Long-term finance lease liabilities | 1,001) | 805) | —) | —) | —) | |
| Operating liabilities | 511,056) | 453,313) | 284,707) | 171,494) | 142,831) | |
| Net operating assets1 | (278,858) | (83,632) | (214,964) | (106,792) | (130,384) | |
| Balance-sheet-based aggregate accruals2 | (195,226) | 131,332) | (108,172) | 23,592) | —) | |
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | — | — | — | — | — | |
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| AbbVie Inc. | -14.27% | -9.69% | 131.82% | — | — | |
| Amgen Inc. | 4.07% | 0.70% | 3.47% | — | — | |
| Bristol-Myers Squibb Co. | -3.86% | -13.40% | -13.24% | — | — | |
| Danaher Corp. | -1.55% | 16.41% | 52.50% | — | — | |
| Eli Lilly & Co. | 11.38% | 16.60% | 18.42% | — | — | |
| Gilead Sciences Inc. | -2.92% | -2.34% | 59.36% | — | — | |
| Johnson & Johnson | 19.84% | 3.75% | 7.76% | — | — | |
| Merck & Co. Inc. | 0.46% | 25.14% | 15.90% | — | — | |
| Moderna Inc. | 84.44% | 536.93% | — | — | — | |
| Pfizer Inc. | 24.95% | -7.11% | -14.91% | — | — | |
| Regeneron Pharmaceuticals Inc. | 11.07% | 43.54% | 16.50% | — | — | |
| Thermo Fisher Scientific Inc. | -1.78% | 43.38% | 1.98% | — | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | 5.69% | 7.13% | 20.29% | 200.00% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Health Care | 2.87% | 6.05% | 10.43% | 200.00% | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= 232,198 – 511,056 = -278,858
2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= -278,858 – -83,632 = -195,226
3 2022 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -195,226 ÷ [(-278,858 + -83,632) ÷ 2] = —
4 Click competitor name to see calculations.
Cash-Flow-Statement-Based Accruals Ratio
Cytokinetics Inc., cash flow statement computation of aggregate accruals
US$ in thousands
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Net loss | (388,955) | (215,314) | (127,290) | (121,692) | (106,289) | |
| Less: Net cash provided by (used in) operating activities | (299,516) | (142,522) | 8,943) | (90,907) | (101,215) | |
| Less: Net cash (used in) provided by investing activities | (262,134) | (147,777) | (196,515) | (74,707) | 5,133) | |
| Cash-flow-statement-based aggregate accruals | 172,695) | 74,985) | 60,282) | 43,922) | (10,207) | |
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | — | — | — | — | — | |
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| AbbVie Inc. | -16.25% | -10.28% | 44.98% | — | — | |
| Amgen Inc. | 8.81% | -12.87% | 6.95% | — | — | |
| Bristol-Myers Squibb Co. | -9.10% | -12.73% | -15.67% | — | — | |
| Danaher Corp. | 1.44% | 18.48% | 42.90% | — | — | |
| Eli Lilly & Co. | 10.32% | 5.30% | 11.38% | — | — | |
| Gilead Sciences Inc. | -4.95% | -4.86% | 20.18% | — | — | |
| Johnson & Johnson | 10.78% | 8.23% | 17.00% | — | — | |
| Merck & Co. Inc. | 0.61% | 29.09% | 13.75% | — | — | |
| Moderna Inc. | 118.22% | 626.00% | — | — | — | |
| Pfizer Inc. | 18.46% | 13.18% | 3.27% | — | — | |
| Regeneron Pharmaceuticals Inc. | 18.61% | 49.24% | 10.32% | — | — | |
| Thermo Fisher Scientific Inc. | -0.06% | 34.69% | -0.89% | — | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | 3.92% | 9.39% | 11.93% | 6.21% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Health Care | 3.11% | 7.13% | 6.55% | 3.35% | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 172,695 ÷ [(-278,858 + -83,632) ÷ 2] = —
2 Click competitor name to see calculations.