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 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 × 204 ÷ 3,301 = 6.18%
- 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.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?