Abbott Laboratories (ABT)
Analysis of Bad Debts
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
TRADE RECEIVABLE VALUATIONS
Accounts receivable are stated at their net realizable value. The allowance against gross trade receivables reflects the best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. Accounts receivable are charged off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.
Source: 10-K (filing date: 2019-02-22).
Allowance for Doubtful Accounts Receivable
1 2018 Calculation
Allowance as a percentage of trade receivables, gross = 100 × Allowances for doubtful accounts and product returns ÷ Trade receivables, gross
= 100 × ÷ =
|Financial ratio||Description||The company|
|Allowance as a percentage of trade receivables, gross||Allowance for doubtful accounts divided by the gross accounts receivable.||Abbott Laboratories’s allowance as a percentage of trade receivables, gross decreased from 2016 to 2017 but then slightly increased from 2017 to 2018.|