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: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
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 a notable increase from 411 million USD in June 2019 to 830 million USD by June 2024. This trend indicates a rising provision for potential credit losses over the observed period, with a peak in 2020 at 788 million, a slight decrease in the following years, and an overall upward movement toward 2024.
- Accounts Receivable, Gross
- Gross accounts receivable showed a consistent upward trajectory throughout the period. Starting at approximately 29,935 million USD in June 2019, the figure grew steadily each year, culminating in 57,754 million USD by June 2024. This near doubling suggests increased sales activity or extended credit terms over the five-year span.
- Allowance as a Percentage of Gross Accounts Receivable
- The ratio of allowance for doubtful accounts to gross accounts receivable fluctuated within a relatively narrow range between 1.32% and 2.4%. It peaked at 2.4% in June 2020, coinciding with a higher allowance provision likely reflecting increased credit risk concerns during that period. Subsequently, the percentage declined to around 1.32% in June 2023, before a slight increase to 1.44% in June 2024. This pattern indicates that, despite rising absolute allowances and receivables, the proportion of doubtful accounts relative to total receivables remained relatively stable.