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
Cash-Flow-Statement-Based Accruals Ratio

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

US$ in millions

	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	1.15%	2.58%	7.61%	-0.13%	200.00%	—

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
= 112,888 – 39,351 = 73,537

² 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets₂₀₂₄ – Net operating assets₂₀₂₃
= 73,537 – 73,426 = 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.

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

US$ in millions

	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	-0.17%	2.27%	4.81%	-4.89%	-2.34%	—

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.

Procter & Gamble Co. (NYSE:PG)

Financial Reporting Quality: Aggregate Accruals

Balance-Sheet-Based Accruals Ratio

Cash-Flow-Statement-Based Accruals Ratio