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.
Paying user area
Try for free
Edwards Lifesciences Corp. pages available for free this week:
- Statement of Comprehensive Income
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Analysis of Debt
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Edwards Lifesciences Corp. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
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 × ÷ =
The financial data reveals trends concerning accounts receivable and their related allowances over the five-year period ending December 31, 2021.
- Trade Accounts Receivable
- There is a clear upward trend in trade accounts receivable, increasing from $430.1 million in 2017 to $591.5 million in 2021. This growth indicates an expansion in sales or credit extended to customers, with notable year-to-year increases particularly between 2018 and 2019, and again between 2020 and 2021.
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts exhibits minor fluctuations, rising from $8.5 million in 2017 to a peak of $9.6 million in 2020 before slightly declining to $9.3 million in 2021. This relative stability suggests the company maintains consistent provisions for potential credit losses despite growing receivables.
- Allowance as a Percentage of Trade Accounts Receivable
- The allowance ratio fluctuates but generally trends downward, starting at 1.98% in 2017, decreasing to 1.57% by 2021, with a slight increase in 2020. This decline points to improved credit quality or more effective management of credit risk, as the allowance is becoming a smaller proportion of the total receivables despite their growth.
Overall, the data indicates increased sales on credit and an expanding receivables base, accompanied by a relatively stable allowance for doubtful accounts. The declining allowance ratio may reflect improved collection practices or a favorable customer credit profile over time.