.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 Doubtful Accounts Receivable
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| | Allowance for doubtful accounts and estimated returns | |||||
| | Receivables, gross | |||||
| Ratio | ||||||
| | Allowance as a percentage of receivables, gross1 | % | % | % | % | % |
Source: Based on data from Colgate-Palmolive Co. Annual Reports
2017 Calculations
1 Allowance as a percentage of receivables, gross = 100 × Allowance for doubtful accounts and estimated returns ÷ Receivables, gross
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of receivables, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | Colgate-Palmolive Co.'s allowance as a percentage of receivables, gross increased from 2015 to 2016 and from 2016 to 2017. |
