Analysis of Bad Debts
Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company 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 Credit Losses
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Allowance as a percentage of finance receivables, gross = 100 × Allowance for credit losses ÷ Finance receivables, gross
= 100 × 327 ÷ 22,449 = 1.46%
| Financial ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of finance receivables, gross | Allowance for credit losses divided by the gross financing receivable. | Caterpillar Inc. allowance as a percentage of finance receivables, gross increased from 2021 to 2022 but then decreased significantly from 2022 to 2023. |