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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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 accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts exhibited fluctuations over the five-year period. Starting at $194 million in 2020, it decreased to $157 million in 2021, followed by an increase to $219 million in 2022. The allowance peaked at $268 million in 2023 before decreasing again to $204 million in 2024. This pattern indicates variability in the estimated uncollectible receivables with a notable peak in 2023.
- Accounts Receivable, Gross
- Gross accounts receivable showed a generally increasing trend across the years. Beginning at $2,395 million in 2020, the figure rose steadily to $2,736 million in 2021, $3,140 million in 2022, $3,233 million in 2023, and reached $3,301 million in 2024. This consistent upward movement suggests growth in sales or extended credit terms over time.
- Allowance as a Percentage of Accounts Receivable, Gross
- The allowance as a percentage of gross accounts receivable demonstrated some volatility. It decreased from 8.1% in 2020 to 5.74% in 2021, then increased to 6.97% in 2022, followed by a rise to its highest point of 8.29% in 2023. In 2024, it declined to 6.18%. These fluctuations imply periodic reassessments of credit risk and changes in the estimated collectibility of receivables relative to their gross value.