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Analysis of Bad Debts

Microsoft Excel

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

Microsoft Excel
Jan 26, 2025 Jan 28, 2024 Jan 29, 2023 Jan 30, 2022 Jan 31, 2021 Jan 26, 2020
Selected Financial Data (US$ in millions)
Allowance for doubtful accounts
Accounts receivable, gross
Financial Ratio
Allowance as a percentage of accounts receivable, gross1

Based on: 10-K (reporting date: 2025-01-26), 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-01-26).

1 2025 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =


The financial data indicates significant changes in accounts receivable and the related allowance for doubtful accounts over the examined periods.

Accounts receivable, gross

There is a substantial upward trend in gross accounts receivable, increasing from 1,659 million USD in January 2020 to 23,069 million USD in January 2025. The growth is especially pronounced between 2023 and 2025, where the amount more than sextuples from 3,831 million USD to 23,069 million USD. This indicates aggressive sales growth or expanded credit terms extending to customers.

Allowance for doubtful accounts

The allowance for doubtful accounts remains relatively stable, moving from 2 million USD in 2020 up to 4 million USD by 2021 and maintaining that level through 2025. This static pattern contrasts sharply with the rapid increase in gross accounts receivable.

Allowance as a percentage of accounts receivable, gross

This ratio has shown a consistent downward trajectory, decreasing from 0.12% in 2020 to just 0.02% in 2025. The allowance rate dropped particularly after 2021 despite the large growth in accounts receivable, suggesting improved collections or credit risk management, or possibly an increasing confidence in the quality of receivables.

Overall, the data reveals rapid growth in receivables alongside a stable and proportionally shrinking allowance for doubtful accounts. This may reflect positive credit conditions, enhanced collection efforts, or adjustments in policy regarding doubtful accounts. However, the stark increase in receivables also raises considerations about potential future credit risk exposure if the trend persists without proportional increases in allowances.