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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- Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Operating Profit Margin since 2007
- Return on Equity (ROE) since 2007
- Price to Operating Profit (P/OP) since 2007
- Analysis of Debt
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2026-06-30), 10-K (reporting date: 2025-06-30), 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).
1 2026 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
An analysis of the credit loss provisions relative to gross accounts receivable reveals a significant divergence between the growth of credit exposure and the reserves held to mitigate potential defaults.
- Trend in Allowance for Credit Losses
- A substantial reduction in the allowance for credit losses is observed from 2021 to 2024, where the balance fell from US$ 2,591 thousand to US$ 73 thousand. Despite a slight recovery to US$ 109 thousand by 2026, the overall level of reserves remains critically low compared to the 2021 baseline.
- Expansion of Gross Accounts Receivable
- Gross accounts receivable have experienced aggressive growth over the reported period. The balance climbed from US$ 466,425 thousand in 2021 to US$ 6,125,523 thousand by 2026. This trajectory indicates a massive expansion in the company's credit extension to its customer base.
- Allowance as a Percentage of Gross Receivables
- The ratio of the allowance to gross receivables shows a precipitous decline. The percentage dropped from 0.56% in 2021 to 0.01% in 2023, eventually reaching 0.00% by 2024 and 2026. This indicates that the provision for doubtful accounts has not scaled in proportion to the growth of the asset balance.
The inverse relationship between the rapid expansion of receivables and the diminishing allowance suggests a highly optimistic credit risk posture. The reduction of the allowance to effectively 0.00% of gross receivables, while the total outstanding balance increased more than tenfold, implies that nearly no credit losses are being anticipated despite the substantial increase in total credit exposure.