Boeing Co. (BA)

Analysis of Bad Debts

Difficulty: Advanced

Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company’s gross accounts receivable.The relationship between the allowance and the balance in receivables should be relatively constant unless there is a change in the economy overall or a change in customer base.

Allowance for Doubtful Accounts Receivable
Allowance for Credit Losses

Allowance for Doubtful Accounts Receivable

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (USD $ in millions)
Valuation allowance	57	62	65	94	127
Accounts receivable, gross	3,936	10,578	8,897	8,807	7,856
Ratio
Allowance as a percentage of accounts receivable, gross¹	1.45%	0.59%	0.73%	1.07%	1.62%

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ Allowance as a percentage of accounts receivable, gross = 100 × Valuation allowance ÷ Accounts receivable, gross
= 100 × 57 ÷ 3,936 = 1.45%

Ratio	Description	The company
Allowance as a percentage of accounts receivable, gross	Allowance for doubtful accounts divided by the gross accounts receivable.	Boeing Co.’s allowance as a percentage of accounts receivable, gross declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Allowance for Credit Losses

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (USD $ in millions)
Allowance for losses on receivables	9	12	10	16	21
Gross customer financing	2,887	3,061	4,211	3,586	3,582
Ratio
Allowance as a percentage of gross customer financing¹	0.31%	0.39%	0.24%	0.45%	0.59%

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ Allowance as a percentage of gross customer financing = 100 × Allowance for losses on receivables ÷ Gross customer financing
= 100 × 9 ÷ 2,887 = 0.31%

Ratio	Description	The company
Allowance as a percentage of gross customer financing	Allowance for credit losses divided by the gross financing receivable.	Boeing Co.’s allowance as a percentage of gross customer financing increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.