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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- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Debt
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Allowance for Doubtful Accounts Receivable
Based on: 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), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Allowance as a percentage of accounts and notes receivable, gross = 100 × Allowance for doubtful account ÷ Accounts and notes receivable, gross
= 100 × ÷ =
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts exhibited considerable fluctuations over the observed period. Starting at US$19 million in 2019, it more than doubled to reach US$39 million in 2020. Subsequently, it slightly decreased to US$33 million in 2021 before experiencing a significant increase to US$78 million in 2022. In 2023, the allowance marginally declined to US$75 million. This pattern suggests a heightened recognition of potential credit losses, particularly in the years 2020 and 2022.
- Accounts and Notes Receivable, Gross
- Gross accounts and notes receivable showed a steady upward trend throughout the period. Beginning at US$3,689 million in 2019, this figure increased consistently each year, reaching US$5,658 million in 2023. The most pronounced growth occurred between 2021 and 2022, with a rise from US$4,023 million to US$5,280 million, indicating an expansion in credit sales or receivables volume.
- Allowance as a Percentage of Accounts and Notes Receivable, Gross
- The allowance as a percentage of gross accounts and notes receivable displayed variability over the years. Initially at a low level of 0.52% in 2019, it nearly doubled in 2020 to 1.01%. A reduction followed in 2021 to 0.82%, before rising sharply to 1.48% in 2022. In 2023, it decreased slightly to 1.33%. These fluctuations imply adjustments in credit risk assessment relative to the increasing receivables, with a peak proportion occurring in 2022.