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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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31).
1 2025 Calculation
Allowance as a percentage of gross accounts receivable = 100 × Allowance for expected credit losses ÷ Gross accounts receivable
= 100 × ÷ =
- Allowance for Expected Credit Losses
- The allowance for expected credit losses has demonstrated a consistent downward trend over the examined periods. Beginning at 94 million US dollars in early 2020, it increased slightly to 104 million in early 2021 but then decreased steadily each subsequent year, reaching 63 million US dollars by early 2025. This indicates a reduction in the anticipated credit risk or improved credit management practices over time.
- Gross Accounts Receivable
- Gross accounts receivable experienced modest growth from 12,578 million US dollars in early 2020 to a peak of 13,002 million in early 2022. However, there was a significant decline to 9,414 million in early 2024, followed by a partial recovery to 10,361 million in early 2025. This fluctuation suggests changes in sales volume, customer payment behavior, or credit policies during these periods.
- Allowance as a Percentage of Gross Accounts Receivable
- The allowance ratio has generally remained stable with minor variations. Starting at 0.75% in early 2020, it rose slightly to 0.81% in early 2021, then decreased to a low of 0.61% in early 2025, with some fluctuations in between. The dip in this ratio, despite the decrease in gross receivables, may reflect improved credit quality or more efficient collection processes over time.
- Overall Analysis
- The data reflects a trend of declining credit loss expectations and an overall reduction in accounts receivable after a peak in early 2022. The allowance as a percentage of gross accounts receivable remains relatively low and stable, suggesting effective risk management and credit control. The notable drop in gross accounts receivable in early 2024 may warrant further investigation into sales trends or customer payment issues during that period.
Allowance for Credit Losses
Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31).
1 2025 Calculation
Allowance as a percentage of financing receivables, gross = 100 × Allowance for losses ÷ Financing receivables, gross
= 100 × ÷ =
Over the observed periods, the allowance for losses and financing receivables, gross, exhibited distinct patterns. The allowance for losses showed an initial increase from 149 million USD in early 2020 to a peak of 321 million USD in early 2021, followed by a steady decline reaching 153 million USD by early 2025. This suggests a reduction in estimated potential credit losses after 2021.
Financing receivables, gross, displayed a generally upward trend with some fluctuations. Starting at 9,892 million USD in early 2020, it increased to 11,120 million USD by early 2023, followed by a slight dip in early 2024 to 10,690 million USD, and then rose again to 11,384 million USD by early 2025. This indicates overall growth in financing receivables despite minor variability.
The allowance as a percentage of financing receivables, gross, mirrored the changes in the allowance for losses but with a decreasing trend after peaking in early 2021. It rose from 1.51% in early 2020 to 2.97% in early 2021, then gradually declined over subsequent years to 1.34% by early 2025. This decline implies an improved credit quality or reduced risk perception in the financing receivables portfolio over time.
- Allowance for Losses
- Increased sharply in 2021, then steadily decreased through 2025.
- Financing Receivables, Gross
- Overall growth with minor fluctuations around 11,000 million USD from 2021 onwards.
- Allowance as Percentage of Financing Receivables, Gross
- Peaked in 2021 at 2.97%, then exhibited a declining trend to 1.34% by 2025, indicating improved risk management or asset quality.