Analysis of Bad Debts
Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company’s 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 (filing date: 2020-08-18), 10-K (filing date: 2019-08-20), 10-K (filing date: 2018-08-14), 10-K (filing date: 2017-08-15), 10-K (filing date: 2016-08-17), 10-K (filing date: 2015-08-13).
1 2020 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × 5,465 ÷ 2,102,564 = 0.26%
|Financial ratio||Description||The company|
|Allowance as a percentage of accounts receivable, gross||Allowance for doubtful accounts divided by the gross accounts receivable.||Lam Research Corp.’s allowance as a percentage of accounts receivable, gross increased from 2018 to 2019 but then slightly decreased from 2019 to 2020 not reaching 2018 level.|