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 Liquidity Ratios
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Analysis of Debt
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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 over the five-year period reveals several notable trends related to credit loss allowances and gross accounts receivable.
- Allowance for Credit Losses
- The allowance for credit losses shows a modest decline from 358 million USD in 2020 to 333 million USD in 2022, followed by a slight increase to 407 million USD by 2024. This suggests an initial reduction in estimated credit risk, with a subsequent reassessment or anticipated increase in potential credit losses in the later years.
- Accounts Receivable, Gross
- The gross accounts receivable figures have exhibited a strong upward trajectory, growing steadily from 22,100 million USD in 2020 to 36,876 million USD in 2024. This significant increase illustrates expanding credit sales or longer collection periods, indicating growth in business operations or changes in credit policies.
- Allowance as a Percentage of Gross Accounts Receivable
- This ratio declined from 1.62% in 2020 to a low of 0.96% in 2023 before marginally rising to 1.10% in 2024. The downward trend implies improved credit quality or more effective credit management during the initial years, whereas the slight increase at the end could reflect a more cautious stance on credit risk or changes in customer payment behavior.
In summary, while the gross accounts receivable has increased markedly, the relative allowance for credit losses has generally decreased before a recent uptick, suggesting evolving dynamics in credit risk assessment and management over the analyzed period.