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: 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), 10-K (reporting date: 2019-07-31).
1 2024 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts exhibited significant fluctuation over the examined periods. It demonstrated a marked increase from US$3 million in 2019 to a peak of US$96 million in 2021, indicating heightened expectations of uncollectible receivables during that year. Subsequently, the allowance decreased substantially to US$5 million by 2024, suggesting improved receivables quality or revised estimations of credit risk.
- Gross Accounts Receivable
- Gross accounts receivable showed a general upward trend, rising from US$90 million in 2019 to US$487 million in 2021. Following this peak, values slightly declined but remained elevated relative to earlier years, recording US$462 million in 2024. This pattern reflects an overall expansion in credit sales or receivable balances over the period, with some stabilization after 2021.
- Allowance as a Percentage of Gross Accounts Receivable
- The allowance as a percentage of gross accounts receivable displayed notable volatility. Starting at 3.33% in 2019, it peaked dramatically at 19.71% in 2021, in line with the spike in allowance value. Thereafter, the ratio declined steadily to 1.08% in 2024, indicating a reduced proportion of receivables considered doubtful. This trend aligns with the decrease in both the allowance for doubtful accounts and the moderate fluctuations in gross receivables.