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.
Allowance for Doubtful Accounts Receivable
Based on: 10-K (filing date: 2020-11-19), 10-K (filing date: 2019-11-26), 10-K (filing date: 2018-11-20), 10-K (filing date: 2017-11-16), 10-K (filing date: 2016-11-21), 10-K (filing date: 2015-11-24).
1 2020 Calculation
Allowance as a percentage of trade receivables, gross = 100 × Allowance for doubtful accounts ÷ Trade receivables, gross
= 100 × 23,900 ÷ 1,298,700 = 1.84%
|Financial ratio||Description||The company|
|Allowance as a percentage of trade receivables, gross||Allowance for doubtful accounts divided by the gross accounts receivable.||Air Products & Chemicals Inc.’s allowance as a percentage of trade receivables, gross increased from 2018 to 2019 but then decreased significantly from 2019 to 2020.|