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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- Income Statement
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- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Return on Equity (ROE) since 2020
- Price to Operating Profit (P/OP) since 2020
- Analysis of Debt
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-01-31), 10-K (reporting date: 2023-01-31), 10-K (reporting date: 2022-01-31), 10-K (reporting date: 2021-01-31).
1 2026 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
The allowance for credit losses has generally increased over the observed period, though with some fluctuation. Concurrent with this, accounts receivable, gross, have exhibited consistent growth. However, the relationship between these two items, as indicated by the allowance as a percentage of gross accounts receivable, reveals a decreasing trend.
- Allowance for Credit Losses
- The allowance for credit losses began at US$1,200 thousand in January 2021 and increased to US$1,600 thousand by January 2022. A more substantial increase was noted through January 2023, reaching US$2,600 thousand. The allowance then decreased to US$2,200 thousand in January 2024 before rising again to US$2,800 thousand in January 2025 and US$3,000 thousand in January 2026. This suggests a potential correlation with the growth in accounts receivable, but also indicates periods of adjustment in the estimated uncollectible amounts.
- Accounts Receivable, Gross
- Accounts receivable, gross, demonstrated significant growth throughout the period. Starting at US$240,399 thousand in January 2021, it increased to US$369,745 thousand in January 2022, US$628,781 thousand in January 2023, US$855,305 thousand in January 2024, US$1,131,364 thousand in January 2025, and finally reaching US$1,364,844 thousand in January 2026. This consistent expansion indicates increasing sales or changes in credit terms offered to customers.
- Allowance as a Percentage of Accounts Receivable, Gross
- The allowance as a percentage of gross accounts receivable decreased steadily over the period. Beginning at 0.50% in January 2021, it declined to 0.43% in January 2022 and 0.41% in January 2023. The rate of decline accelerated in subsequent years, reaching 0.26% in January 2024, 0.25% in January 2025, and 0.22% in January 2026. This suggests that, despite the increasing absolute value of the allowance, the company anticipates a proportionally smaller percentage of accounts receivable will ultimately prove uncollectible. This could be due to improved credit risk assessment, more effective collection efforts, or a shift in the customer base towards lower-risk entities.
The combination of a growing allowance for credit losses and a decreasing allowance percentage suggests a dynamic assessment of credit risk. While the company is reserving more funds in absolute terms to cover potential bad debts, it is doing so at a slower rate relative to the growth in its overall accounts receivable balance.