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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- Common-Size Income Statement
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- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
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- Selected Financial Data since 2020
- Return on Equity (ROE) since 2020
- Total Asset Turnover since 2020
- Analysis of Revenues
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 Calculation
Allowance as a percentage of customer receivables, gross = 100 × Customer receivable reserve ÷ Customer receivables, gross
= 100 × ÷ =
The customer receivable reserve exhibited fluctuating behavior over the five-year period. Initially increasing from 2021 to 2023, it then decreased in 2024 before rising again in 2025. Gross customer receivables also demonstrated an overall upward trend, though with a notable decrease in 2024. The allowance as a percentage of gross customer receivables generally declined, stabilizing towards the end of the period.
- Customer Receivable Reserve
- The customer receivable reserve increased from US$31 million in 2021 to US$44 million in 2023, representing a 42% increase over the period. A subsequent decrease to US$28 million in 2024 was observed, followed by a recovery to US$39 million in 2025. This suggests potential adjustments in credit risk assessment or collection efforts.
- Gross Customer Receivables
- Gross customer receivables increased from US$143 million in 2021 to US$249 million in 2023, indicating growth in revenue or changes in payment terms. A significant decrease to US$175 million occurred in 2024, potentially due to improved collection efficiency or a reduction in sales. Receivables then increased to US$225 million in 2025, suggesting a return to growth.
- Allowance as a Percentage of Gross Customer Receivables
- This ratio began at 21.66% in 2021 and generally trended downward, reaching 16.00% in 2024. This indicates a decreasing proportion of receivables were considered potentially uncollectible relative to the total outstanding amount. A slight increase to 17.33% in 2025 was noted, potentially reflecting a reassessment of credit risk or changes in the aging of receivables.
The observed fluctuations in the reserve and receivables, coupled with the declining percentage, suggest a dynamic credit environment. The decrease in the allowance percentage could indicate improved credit quality or more effective collection processes, while the 2024 dip in gross receivables warrants further investigation to understand the underlying cause. The 2025 rebound in both the reserve and receivables suggests a normalization of activity following the 2024 changes.