Microsoft Excel LibreOffice Calc

Starbucks Corp. (SBUX)


Analysis of Bad Debts

Difficulty: Advanced

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.


Receivables Accounting Policy

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 CPG 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 30, 2018 and October 1, 2017, Starbucks’ allowance for doubtful accounts was $8.0 million and $9.8 million, respectively.

Source: 10-K (filing date: 2018-11-16).


Allowance for Doubtful Accounts Receivable

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Selected Financial Data (USD $ in thousands)
Allowance for doubtful accounts 8,000  9,800  9,400  10,800  6,700  5,700 
Accounts receivable, gross 701,100  880,200  778,200  729,800  637,700  567,100 
Ratio
Allowance as a percentage of accounts receivable, gross1 1.14% 1.11% 1.21% 1.48% 1.05% 1.01%

Based on: 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), 10-K (filing date: 2013-11-18).

2018 Calculations

1 Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × 8,000 ÷ 701,100 = 1.14%

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 declined from 2016 to 2017 but then slightly increased from 2017 to 2018.