Microsoft Excel LibreOffice Calc

Analysis of Bad Debts

Difficulty: Advanced

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 Credit Losses

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Allowance for credit losses 362  341  336  398  375 
Finance receivables, gross 22,632  22,397  22,959  24,066  24,061 
Ratio
Allowance as a percentage of finance receivables, gross1 1.60% 1.52% 1.46% 1.65% 1.56%

Source: Based on data from Caterpillar Inc. Annual Reports

2017 Calculations

1 Allowance as a percentage of finance receivables, gross = 100 × Allowance for credit losses ÷ Finance receivables, gross
= 100 × 362 ÷ 22,632 = 1.60%

Ratio Description The company
Allowance as a percentage of finance receivables, gross Allowance for credit losses divided by the gross financing receivable. Caterpillar Inc.'s allowance as a percentage of finance receivables, gross increased from 2015 to 2016 and from 2016 to 2017.