Raytheon Co. (RTN)
Analysis of Bad Debts
High level of difficulty
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.
Accounting Policy on Receivables
Receivables, net, include amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. Raytheon maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and collateral to the extent applicable.
Source: 10-K (filing date: 2019-02-13).
Allowance for Doubtful Accounts Receivable
|Dec 31, 2018||Dec 31, 2017||Dec 31, 2016||Dec 31, 2015||Dec 31, 2014|
|Selected Financial Data (US$ in millions)|
|Allowance for doubtful accounts|
|Allowance as a percentage of receivables, gross1|
1 Allowance as a percentage of receivables, gross = 100 × Allowance for doubtful accounts ÷ Receivables, gross
= 100 × ÷ =
|Allowance as a percentage of receivables, gross||Allowance for doubtful accounts divided by the gross accounts receivable.||Raytheon Co.’s allowance as a percentage of receivables, gross declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.|