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Raytheon Co. (RTN)

Analysis of Goodwill and Intangible Assets

Difficulty: Advanced

Analyst Adjustments: Removal of Goodwill
Adjusted Ratios: Removal of Goodwill (Summary)
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Analyst Adjustments: Removal of Goodwill

Raytheon Co., adjustments to financial data

USD $ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Goodwill
	Total assets (adjusted)
	Adjustment to Total Raytheon Company Stockholders’ Equity
	Total Raytheon Company stockholders’ equity (as reported)
	Less: Goodwill
	Total Raytheon Company stockholders’ equity (adjusted)

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

Raytheon Co., Financial Data: Reported vs. Adjusted

Adjusted Ratios: Removal of Goodwill (Summary)

Raytheon Co., adjusted ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Raytheon Co.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Adjusted ROE	A profitability ratio calculated as net income divided by adjusted shareholders’ equity.
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Raytheon Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Raytheon Co., Ratios: Reported vs. Adjusted

Adjusted Total Asset Turnover

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (USD $ in millions)
	Net sales
	Total assets
	Ratio
	Total asset turnover¹
	Adjusted for Goodwill
	Selected Financial Data (USD $ in millions)
	Net sales
	Adjusted total assets
	Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

2018 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= hidden ÷ hidden = hidden

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Raytheon Co.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (USD $ in millions)
	Total assets
	Total Raytheon Company stockholders’ equity
	Ratio
	Financial leverage¹
	Adjusted for Goodwill
	Selected Financial Data (USD $ in millions)
	Adjusted total assets
	Adjusted total Raytheon Company stockholders’ equity
	Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

2018 Calculations

¹ Financial leverage = Total assets ÷ Total Raytheon Company stockholders’ equity
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Raytheon Company stockholders’ equity
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.

Adjusted Return on Equity (ROE)

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (USD $ in millions)
	Net income attributable to Raytheon Company
	Total Raytheon Company stockholders’ equity
	Ratio
	ROE¹
	Adjusted for Goodwill
	Selected Financial Data (USD $ in millions)
	Net income attributable to Raytheon Company
	Adjusted total Raytheon Company stockholders’ equity
	Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

2018 Calculations

¹ ROE = 100 × Net income attributable to Raytheon Company ÷ Total Raytheon Company stockholders’ equity
= 100 × hidden ÷ hidden = hidden

² Adjusted ROE = 100 × Net income attributable to Raytheon Company ÷ Adjusted total Raytheon Company stockholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as net income divided by adjusted shareholders’ equity.

Adjusted Return on Assets (ROA)

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (USD $ in millions)
	Net income attributable to Raytheon Company
	Total assets
	Ratio
	ROA¹
	Adjusted for Goodwill
	Selected Financial Data (USD $ in millions)
	Net income attributable to Raytheon Company
	Adjusted total assets
	Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

2018 Calculations

¹ ROA = 100 × Net income attributable to Raytheon Company ÷ Total assets
= 100 × hidden ÷ hidden = hidden

² Adjusted ROA = 100 × Net income attributable to Raytheon Company ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Raytheon Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

	Raytheon Co.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

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Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality