Stock Analysis on Net
Stock Analysis on Net
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Starbucks Corp. (NASDAQ:SBUX)

Analysis of Bad Debts

Advanced level

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.

Accounting Policy on Receivables

Receivables, net of Allowance for Doubtful Accounts

Starbucks’ receivables are mainly comprised of receivables for product and equipment sales to and royalties from the licensees, as well as receivables from the Global Coffee Alliance and other Channel Development customers. Starbucks’ allowance for doubtful accounts is calculated based on historical experience, customer credit risk and application of the specific identification method. As of September 29, 2019 and September 30, 2018, Starbucks’ allowance for doubtful accounts was $6.7 million and $8.0 million, respectively.

Source: 10-K (filing date: 2019-11-15).

Allowance for Doubtful Accounts Receivable

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Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Selected Financial Data (US$ in thousands)
Allowance for doubtful accounts 6,700  8,000  9,800  9,400  10,800  6,700 
Accounts receivable, gross 885,900  701,100  880,200  778,200  729,800  637,700 
Financial Ratio
Allowance as a percentage of accounts receivable, gross1 0.76% 1.14% 1.11% 1.21% 1.48% 1.05%

Based on: 10-K (filing date: 2019-11-15), 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14).

1 2019 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × 6,700 ÷ 885,900 = 0.76%

Financial ratio Description The company
Allowance as a percentage of accounts receivable, gross Allowance for doubtful accounts divided by the gross accounts receivable. Starbucks Corp.’s allowance as a percentage of accounts receivable, gross increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.