Stock Analysis on Net

PepsiCo Inc. (NASDAQ:PEP)

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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
Dec 28, 2024 Dec 30, 2023 Dec 31, 2022 Dec 25, 2021 Dec 26, 2020
Selected Financial Data (US$ in millions)
Allowance
Accounts and notes receivable, gross
Financial Ratio
Allowance as a percentage of accounts and notes receivable, gross1

Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).

1 2024 Calculation
Allowance as a percentage of accounts and notes receivable, gross = 100 × Allowance ÷ Accounts and notes receivable, gross
= 100 × ÷ =


Allowance
The allowance for doubtful accounts exhibited a fluctuating trend over the given period. It initially decreased from 201 million USD in 2020 to 147 million USD in 2021, then slightly increased to 150 million USD in 2022. A more notable rise occurred in 2023 to 175 million USD, followed by a substantial increase to 356 million USD in 2024.
Accounts and notes receivable, gross
The gross accounts and notes receivable generally showed an upward trend from 2020 to 2024. It rose from 8605 million USD in 2020 to a peak of 10990 million USD in 2023, before experiencing a slight decline to 10689 million USD in 2024.
Allowance as a percentage of accounts and notes receivable, gross
The allowance as a percentage of the gross accounts and notes receivable demonstrated an initial decrease from 2.34% in 2020 to 1.45% in 2022, indicating a reduction in the relative provision for doubtful accounts. This trend reversed starting in 2023, with the ratio increasing to 1.59% and sharply rising to 3.33% in 2024, reflecting heightened caution or increased credit risk assessments during the final year.
Overall Insights
While the gross receivables increased over the years, the allowance for doubtful accounts did not consistently follow the same pattern, which resulted in fluctuations in the allowance ratio. The marked increase in both the allowance and its percentage of gross receivables in 2024 suggests a reassessment of credit risk or anticipation of higher potential losses. The data indicates a generally stable increase in receivables until 2023, followed by a cautious approach to credit risk management in the latest year.