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: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Allowance as a percentage of trade accounts receivable = 100 × Allowance for doubtful accounts ÷ Trade accounts receivable
= 100 × ÷ =
Financial ratio | Description | The company |
---|---|---|
Allowance as a percentage of trade accounts receivable | Allowance for doubtful accounts divided by the gross accounts receivable. | Edwards Lifesciences Corp. allowance as a percentage of trade accounts receivable increased from 2019 to 2020 but then decreased significantly from 2020 to 2021. |