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: 2025-07-31), 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31).
1 2025 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
The financial data reveals notable fluctuations in the allowance for doubtful accounts and accounts receivable gross figures over the reported periods. The allowance for doubtful accounts experienced a significant peak in the year ending July 31, 2021, reaching 96 million US dollars, followed by a sharp decline in subsequent years, stabilizing at 5 million US dollars by July 31, 2024 and maintaining that level into 2025.
The gross accounts receivable showed overall growth over the analyzed timeframe, increasing from 161 million US dollars in 2020 to 535 million US dollars projected for 2025. This indicates a rising volume of receivables, although the growth pattern includes a slight dip in 2023 before recovering.
The allowance as a percentage of gross accounts receivable peaked at 19.71% in 2021 but then steeply decreased, settling below 1% by 2025. This trend suggests an improvement in the quality of receivables or more effective credit management following the high allowance in 2021.
- Allowance for Doubtful Accounts
- Marked by a pronounced spike in 2021, the allowance value rose significantly before rapidly declining, indicating potential past concerns over credit risk and subsequent improvements.
- Accounts Receivable, Gross
- Showing an overall upward trajectory, the gross accounts receivable increased steadily with a brief decline in 2023, highlighting expanding sales or credit extended to customers.
- Allowance as Percentage of Accounts Receivable, Gross
- This ratio's peak in 2021 and subsequent steady reduction imply enhanced collections efficiency or creditworthiness of customers, contributing to lower anticipated credit losses relative to receivables.