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Caterpillar Inc. (NYSE:CAT)
Analysis of Bad Debts
Advanced level
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
Based on: 10-K (filing date: 2020-02-19), 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16).
1 2019 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.’s allowance as a percentage of finance receivables, gross increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level. |