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.
Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-03-31), 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
1 2025 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowances ÷ Accounts receivable, gross
= 100 × 1,600 ÷ 772,700 = 0.21%
The analysis of the allowance for doubtful accounts indicates a transition from a period of stability and low credit risk between 2020 and 2022 to a period of increased provision starting in 2023. While the gross accounts receivable balance has experienced volatility, there is a clear upward trend in both the absolute value of the allowance and the percentage of receivables deemed doubtful.
- Gross Accounts Receivable Trends
- Gross accounts receivable exhibited fluctuations over the six-year period, declining from 592,998 thousand in 2020 to a low of 553,112 thousand in 2021. A significant increase occurred in 2023, reaching 764,500 thousand, and after a temporary dip in 2024, the balance peaked at 772,700 thousand by March 31, 2025.
- Allowance for Doubtful Accounts Volume
- The absolute value of the allowance remained relatively stagnant between 2021 and 2022 at 350 thousand. However, a substantial increase is observed starting in 2023, where the allowance rose to 1,300 thousand. Despite a slight reduction to 1,200 thousand in 2024, the provision increased further to 1,600 thousand by 2025, representing a significant increase compared to the 2020 baseline.
- Credit Risk Ratio Analysis
- The allowance as a percentage of gross accounts receivable remained minimal and stable at 0.06% to 0.07% from 2020 through 2022. A shift in the risk profile is evident starting in 2023, as the ratio jumped to 0.17%. This upward trajectory continued through 2024 and 2025, concluding at 0.21%. Although the ratio has tripled since 2022, the overall percentage remains low, suggesting that the vast majority of receivables continue to be viewed as collectible.
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