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.
Paying user area
Try for free
Cisco Systems Inc. pages available for free this week:
- Income Statement
- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Analysis of Geographic Areas
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Operating Profit (P/OP) since 2005
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Cisco Systems Inc. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-07-26), 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25).
1 2025 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit loss ÷ Accounts receivable, gross
= 100 × ÷ =
The analysis of the financial data reveals a consistent downward trend in the allowance for credit loss over the six-year period from 2020 to 2025. The allowance decreased from USD 143 million in 2020 to USD 69 million in 2025, indicating an improvement in anticipated credit losses or enhanced credit management practices.
Conversely, the gross accounts receivable figures demonstrate a fluctuating but overall increasing trend. Starting at USD 5615 million in 2020, the amount grew to USD 6770 million by 2025. Notably, there was a dip in 2023, with values decreasing from USD 6705 million in 2022 to USD 5939 million, before recovering in subsequent years.
The allowance as a percentage of gross accounts receivable shows a steady decline throughout the period. Beginning at 2.55% in 2020, this ratio decreased to 1.02% in 2025, reflecting a lower proportion of accounts receivable being set aside for credit losses relative to the gross receivables. This declining ratio supports the interpretation of improved credit quality or more efficient credit risk management.
- Allowance for Credit Loss
- Declined from USD 143 million to USD 69 million over six years, indicating reduced expected credit losses.
- Gross Accounts Receivable
- Increased overall from USD 5615 million to USD 6770 million, with a temporary decrease in 2023 before resuming growth.
- Allowance as a Percentage of Gross Accounts Receivable
- Reduced from 2.55% to 1.02%, suggesting improved credit risk profile or more conservative allowance policies.
Overall, the data reflect positive trends in credit risk management, with increasing receivables accompanied by decreasing allowances and allowance ratios. The temporary decrease in gross accounts receivable in 2023 appears to be an anomaly amid a general upward trajectory in receivables. The improvement in allowance coverage ratios may enhance confidence in the collectability of receivables.
Allowance for Credit Losses
Based on: 10-K (reporting date: 2025-07-26), 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25).
1 2025 Calculation
Allowance as a percentage of gross financing receivables less unearned income = 100 × Allowance for credit loss ÷ Gross financing receivables less unearned income
= 100 × ÷ =
The financial data reveals several notable trends in the company's credit risk management and financing receivables over the analyzed period.
- Allowance for Credit Loss
- The allowance for credit loss consistently decreased from US$138 million in July 2020 to US$50 million in July 2025. This decline suggests an improving credit risk profile or a conservative reduction in the reserve for potential credit losses over the years.
- Gross Financing Receivables Less Unearned Income
- There is a clear downward trend in gross financing receivables less unearned income, falling from US$10,780 million in July 2020 to US$6,511 million in July 2025. This reduction could indicate a strategic shift towards lower financing exposure, decreased lending activity, or increased collections.
- Allowance as a Percentage of Gross Financing Receivables Less Unearned Income
- This ratio fluctuated initially, rising from 1.28% in 2020 to a peak of 1.58% in 2022, then steadily declining to 0.77% by 2025. The initial increase may reflect heightened perceived credit risk or precautionary adjustments, whereas the subsequent decline aligns with decreasing allowance and financing receivables, implying improved asset quality or altered risk assessment policies.
Overall, the data indicates that the company has been reducing both its gross financing receivables and associated credit loss reserves, with a proportional decrease in the allowance relative to receivables in recent years, suggesting improved credit conditions or a strategic tightening of credit exposure.