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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- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Revenues
- Analysis of Debt
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 Calculation
Allowance as a percentage of trade receivables, gross = 100 × Allowance for expected credit loss ÷ Trade receivables, gross
= 100 × ÷ =
The allowance for expected credit loss exhibited an increasing trend over the five-year period. Simultaneously, trade receivables, gross, also increased, though the rate of increase differed between the two items. Consequently, the allowance as a percentage of trade receivables, gross, demonstrated a notable upward trajectory, particularly in the later years of the observed period.
- Allowance for Expected Credit Loss
- The allowance for expected credit loss began at US$21 million in 2021 and increased to US$58 million by 2025. The increase was gradual from 2021 to 2023, with values of US$22 million and US$23 million respectively. A significant jump occurred between 2023 and 2024, rising to US$45 million, and continued to increase to US$58 million in 2025. This suggests a potential shift in credit risk assessment or an increase in anticipated uncollectible accounts.
- Trade Receivables, Gross
- Trade receivables, gross, increased consistently from US$8,000 million in 2021 to US$9,650 million in 2025. The growth was relatively steady, with annual increases ranging from approximately US$173 million to US$745 million. This indicates a general expansion in sales or outstanding customer balances.
- Allowance as a Percentage of Trade Receivables, Gross
- This ratio began at 0.26% in 2021 and 2022, dipped slightly to 0.26% in 2023, and then rose substantially to 0.50% in 2024 and 0.60% in 2025. The increase in this percentage suggests that the company is recognizing a greater potential for uncollectible accounts relative to its overall receivables balance. This could be due to a change in customer mix, economic conditions, or a more conservative approach to credit risk management. The significant increase in the latter years warrants further investigation.
The combined trends suggest that while the company’s receivables are growing, the increasing allowance for expected credit loss, and particularly the rising percentage, indicates a heightened awareness of potential credit risk. Monitoring these trends closely will be important for assessing the company’s financial health and the effectiveness of its credit and collection policies.