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 Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Revenues
- Analysis of Debt
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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 × Allowances for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
The analysis of the provided financial data reveals several important trends in the allowances for credit losses and accounts receivable for the respective periods.
- Allowances for Credit Losses
- The allowances for credit losses show a general upward trend from 2020 to 2023, starting at 44 million US dollars in 2020 and gradually increasing to 56 million by the end of 2023. In the last period, 2024, there is a slight decrease to 52 million US dollars. This pattern suggests a cautious stance toward potential credit risks with a minor reduction in the most recent year.
- Accounts Receivable, Gross
- The gross accounts receivable amounts fluctuate over the years. It initially declines from 4936 million US dollars in 2020 to 4540 million in 2021, then rises again to 4832 million in 2022. Subsequently, it decreases slightly to 4716 million in 2023 and further to 4472 million in 2024. This indicates some instability or variability in the volume of receivables throughout this period.
- Allowance as a Percentage of Accounts Receivable, Gross
- This ratio exhibits a steady increase from 0.89% in 2020 to 1.19% in 2023, followed by a small decline to 1.16% in 2024. The rising trend up to 2023 indicates growing prudence in reserves relative to the size of accounts receivable, possibly reflecting heightened risk management. The slight reduction in 2024 may suggest improved credit conditions or reassessment of risk exposure.
Overall, the data suggests a tendency toward increased provisioning for credit losses between 2020 and 2023, aligning with conservative financial management practices despite some volatility in receivables. The minor decreases observed in 2024 could point to stabilization or improvement in credit risk profiles.