Stock Analysis on Net

Merck & Co. Inc. (NYSE:MRK)

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

Merck & Co. Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Operating Assets
Total assets 117,106 106,675 109,160 105,694 91,588
Less: Cash and cash equivalents 13,242 6,841 12,694 8,096 8,062
Less: Short-term investments 447 252 498
Operating assets 103,417 99,582 95,968 97,598 83,526
Operating Liabilities
Total liabilities 70,734 69,040 63,102 67,437 66,184
Less: Loans payable and current portion of long-term debt 2,649 1,372 1,946 2,412 6,431
Less: Long-term debt, excluding current portion 34,462 33,683 28,745 30,690 25,360
Operating liabilities 33,623 33,985 32,411 34,335 34,393
 
Net operating assets1 69,794 65,597 63,557 63,263 49,133
Balance-sheet-based aggregate accruals2 4,197 2,040 294 14,130
Financial Ratio
Balance-sheet-based accruals ratio3 6.20% 3.16% 0.46% 25.14%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
AbbVie Inc. 13.10% -22.39% -14.27% -9.69%
Amgen Inc. -10.36% 57.08% 4.07% 0.70%
Bristol-Myers Squibb Co. -3.21% -7.12% -3.86% -13.40%
Danaher Corp. -3.94% 3.48% -1.55% 16.41%
Eli Lilly & Co. 29.18% 28.84% 11.38% 16.60%
Gilead Sciences Inc. -11.79% 1.04% -2.92% -2.34%
Johnson & Johnson 10.61% -21.13% 19.84% 3.75%
Pfizer Inc. -11.48% 30.66% 24.95% -7.11%
Regeneron Pharmaceuticals Inc. 25.51% 1.17% 11.07% 43.54%
Thermo Fisher Scientific Inc. 2.28% 4.96% -1.78% 43.38%
Vertex Pharmaceuticals Inc. 42.13% 61.24% 14.07% 18.20%
Balance-Sheet-Based Accruals Ratio, Sector
Pharmaceuticals, Biotechnology & Life Sciences 1.64% 7.36% 4.84% 6.18%
Balance-Sheet-Based Accruals Ratio, Industry
Health Care 4.65% 8.13% 2.80% 4.68%

Based on: 10-K (reporting date: 2024-12-31), 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).

1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= 103,41733,623 = 69,794

2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= 69,79465,597 = 4,197

3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 4,197 ÷ [(69,794 + 65,597) ÷ 2] = 6.20%

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, Merck & Co. Inc. deteriorated earnings quality from 2023 to 2024.

Cash-Flow-Statement-Based Accruals Ratio

Merck & Co. Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net income attributable to Merck & Co., Inc. 17,117 365 14,519 13,049 7,067
Less: Net cash provided by operating activities 21,468 13,006 19,095 13,122 10,253
Less: Net cash used in investing activities (7,734) (14,083) (4,960) (16,421) (9,443)
Cash-flow-statement-based aggregate accruals 3,383 1,442 384 16,348 6,257
Financial Ratio
Cash-flow-statement-based accruals ratio1 5.00% 2.23% 0.61% 29.09%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
AbbVie Inc. 10.32% -24.89% -16.25% -10.28%
Amgen Inc. -11.16% 52.47% 8.81% -12.87%
Bristol-Myers Squibb Co. -4.97% -5.99% -9.10% -12.73%
Danaher Corp. -1.25% 8.20% 1.44% 18.48%
Eli Lilly & Co. 28.52% 28.13% 10.32% 5.30%
Gilead Sciences Inc. -18.05% -0.19% -4.95% -4.86%
Johnson & Johnson 10.58% 13.66% 10.78% 8.23%
Pfizer Inc. -5.24% 19.96% 18.46% 13.18%
Regeneron Pharmaceuticals Inc. 12.04% 14.35% 18.61% 49.24%
Thermo Fisher Scientific Inc. 4.71% 3.80% -0.06% 34.69%
Vertex Pharmaceuticals Inc. 43.34% 62.03% -14.45% 1.38%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Pharmaceuticals, Biotechnology & Life Sciences 2.07% 9.68% 2.52% 8.19%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Health Care 3.21% 8.44% 2.38% 5.78%

Based on: 10-K (reporting date: 2024-12-31), 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).

1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 3,383 ÷ [(69,794 + 65,597) ÷ 2] = 5.00%

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, Merck & Co. Inc. deteriorated earnings quality from 2023 to 2024.