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: 2026-07-31), 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).
1 2026 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × 5 ÷ 630 = 0.79%
The financial data reveals a significant reduction in the allowance for doubtful accounts despite a general expansion in gross accounts receivable over the analyzed period. This divergence suggests a substantial improvement in the credit quality of the receivables portfolio or a strategic shift in risk management and collection efficiency.
- Allowance for Doubtful Accounts
- A sharp downward trajectory is observed, beginning with a balance of 96 million USD in July 2021 and decreasing to 5 million USD by July 2024. This balance remains stagnant at 5 million USD through July 2026, indicating a stabilized level of reserves allocated for potential credit losses.
- Gross Accounts Receivable
- Gross receivables experienced a period of fluctuation between July 2021 and July 2023, moving from 487 million USD to a low of 412 million USD. Subsequently, a consistent growth trend emerged, with balances increasing to 630 million USD by July 2026, signaling an increase in the total volume of outstanding credit extended.
- Allowance as a Percentage of Gross Accounts Receivable
- The ratio of allowance to gross receivables demonstrates a precipitous decline, falling from 19.71% in July 2021 to 0.79% by July 2026. The most aggressive compression occurred between 2021 and 2023, with the ratio continuing to dwindle to a sub-1% threshold by 2025. This pattern reflects a dramatic decrease in the anticipated loss rate relative to the total outstanding receivables, suggesting a significantly lower risk profile for the company's credit exposure.
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