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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- Statement of Comprehensive Income
- Cash Flow Statement
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Analysis of Revenues
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for doubtful accounts
- The allowance for doubtful accounts exhibited an overall increasing trend over the examined period. Starting at 80,600 thousand US dollars in 2015, it slightly decreased to 75,700 thousand in 2016, but subsequently increased each year, reaching 110,800 thousand by 2019. This indicates a growing provision for potential credit losses, suggesting increased caution regarding receivables collectibility.
- Accounts receivable, gross
- The gross accounts receivable showed a steady upward trend throughout the period. Beginning at 2,482,200 thousand US dollars in 2015, the figure progressively increased to 3,303,100 thousand in 2019, reflecting an expansion in the volume of credit sales or a lengthening of receivables collection cycle.
- Allowance as a percentage of accounts receivable, gross
- This metric fluctuated slightly but remained within a narrow range, starting at 3.25% in 2015, dipping to 2.9% in 2016, and then gradually rising to a peak of 3.42% in 2018, before slightly decreasing to 3.35% in 2019. The relative stability of this percentage suggests that while the absolute allowance and receivable balances grew, the proportion of potentially uncollectible accounts stayed relatively consistent over the years.
- Summary
- The data reflects a consistent increase in both gross accounts receivable and the allowance for doubtful accounts, indicating growth in credit extended to customers alongside a cautious approach to credit risk management. The stable allowance ratio suggests that the company maintained a consistent level of provisioning relative to its receivables, despite fluctuations in individual yearly values.