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.
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- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2020
- Price to Earnings (P/E) since 2020
- Price to Operating Profit (P/OP) since 2020
- Price to Book Value (P/BV) since 2020
- Analysis of Debt
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2024-12-31), 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).
1 2024 Calculation
Allowance as a percentage of customer receivables, gross = 100 × Customer receivable reserve ÷ Customer receivables, gross
= 100 × ÷ =
- Customer Receivable Reserve
- The customer receivable reserve demonstrates a declining trend over the observed period from 2020 to 2024. Starting at 91 million US dollars in 2020, the reserve significantly dropped to 31 million in 2021. Although there was a slight increase in 2022 and 2023, reaching 39 million and 44 million US dollars respectively, the reserve decreased again to 28 million US dollars in 2024. Overall, this indicates a reduction in the provisions set aside for potential uncollectible customer receivables.
- Customer Receivables, Gross
- Gross customer receivables exhibited some volatility during the period. Beginning at 190 million US dollars in 2020, there was a decline to 143 million in 2021. Subsequently, gross receivables increased to 200 million in 2022 and peaked at 249 million US dollars in 2023 before falling to 175 million in 2024. This fluctuation suggests variability in sales credit or outstanding customer balances over the years.
- Allowance as a Percentage of Customer Receivables, Gross
- This ratio, representing the allowance reserve relative to gross customer receivables, shows a consistent downward trend. It started at a relatively high level of 47.72% in 2020, sharply decreased to 21.66% in 2021, and then continued to gradually decline to 19.5% in 2022, 17.67% in 2023, and finally 16% in 2024. The decreasing percentage suggests improving collectability of customer receivables or better management of credit risk over time.
- Overall Analysis
- The data indicates that while gross customer receivables have experienced fluctuations, the reserve for doubtful accounts and the allowance ratio have decreased consistently, implying enhanced credit risk management and improved recovery of receivables. The company appears to be more confident in the collectability of its receivables in the latest years compared to earlier periods.