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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Caterpillar Inc. pages available for free this week:
- Statement of Comprehensive Income
- Cash Flow Statement
- Analysis of Profitability Ratios
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
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Allowance for Credit Losses
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Allowance as a percentage of finance receivables, gross = 100 × Allowance for credit losses ÷ Finance receivables, gross
= 100 × ÷ =
| Financial ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of finance receivables, gross | Allowance for credit losses divided by the gross financing receivable. | Caterpillar Inc. allowance as a percentage of finance receivables, gross increased from 2019 to 2020 but then decreased significantly from 2020 to 2021. |