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
- Statement of Comprehensive Income
- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Return on Equity (ROE) since 2016
- Return on Assets (ROA) since 2016
- Debt to Equity since 2016
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
The financial data reveals several noteworthy trends over the observed periods.
- Allowance for Credit Losses
- The allowance for credit losses has increased consistently from US$7,253 thousand in 2020 to a peak of US$12,826 thousand in 2023, followed by a slight decline to US$11,244 thousand in 2024. This upward trajectory suggests a growing recognition of potential credit risks over the years, albeit with a modest reduction in the most recent period.
- Gross Accounts Receivable
- Gross accounts receivable have demonstrated a steady and significant increase across the periods, rising from US$1,591,362 thousand in 2020 to US$3,341,587 thousand in 2024. This indicates expanding credit sales or services rendered on credit, reflecting business growth in receivables.
- Allowance as a Percentage of Gross Accounts Receivable
- The allowance ratio exhibits fluctuation within a relatively narrow band. It decreased from 0.46% in 2020 to 0.36% in 2021, increased to 0.44% in 2022 and remained stable at 0.44% in 2023 before declining to 0.34% in 2024. This pattern suggests a differential approach to credit risk provisioning relative to the growth in gross receivables, with the company slightly lowering the relative allowance in the most recent year.