Stock Analysis on Net

Procter & Gamble Co. (NYSE:PG)

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

Procter & Gamble Co., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Jun 30, 2024 Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019
Operating Assets
Total assets 122,370 120,829 117,208 119,307 120,700 115,095
Less: Cash and cash equivalents 9,482 8,246 7,214 10,288 16,181 4,239
Less: Available-for-sale investment securities 6,048
Operating assets 112,888 112,583 109,994 109,019 104,519 104,808
Operating Liabilities
Total liabilities 71,811 73,764 70,354 72,653 73,822 67,516
Less: Debt due within one year 7,191 10,229 8,645 8,889 11,183 9,697
Less: Long-term debt, excluding due within one year 25,269 24,378 22,848 23,099 23,537 20,395
Operating liabilities 39,351 39,157 38,861 40,665 39,102 37,424
 
Net operating assets1 73,537 73,426 71,133 68,354 65,417 67,384
Balance-sheet-based aggregate accruals2 111 2,293 2,779 2,937 (1,967)
Financial Ratio
Balance-sheet-based accruals ratio3 0.15% 3.17% 3.98% 4.39% -2.96%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Staples 0.00% 3.77% 6.33% -1.67% -0.87%

Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).

1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= 112,88839,351 = 73,537

2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= 73,53773,426 = 111

3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 111 ÷ [(73,537 + 73,426) ÷ 2] = 0.15%

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, Procter & Gamble Co. improved earnings quality from 2023 to 2024.

Cash-Flow-Statement-Based Accruals Ratio

Procter & Gamble Co., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Jun 30, 2024 Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019
Net earnings attributable to Procter & Gamble (P&G) 14,879 14,653 14,742 14,306 13,027 3,897
Less: Operating activities 19,846 16,848 16,723 18,371 17,403 15,242
Less: Investing activities (3,504) (3,500) (4,424) (2,834) 3,045 (3,490)
Cash-flow-statement-based aggregate accruals (1,463) 1,305 2,443 (1,231) (7,421) (7,855)
Financial Ratio
Cash-flow-statement-based accruals ratio1 -1.99% 1.81% 3.50% -1.84% -11.18%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Staples 0.00% 3.53% 3.35% -7.03% -1.88%

Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).

1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -1,463 ÷ [(73,537 + 73,426) ÷ 2] = -1.99%

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, Procter & Gamble Co. deteriorated earnings quality from 2023 to 2024.