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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- Income Statement
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Net Profit Margin since 2005
- Current Ratio since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
- Aggregate Accruals
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Allowance as a percentage of receivables, gross = 100 × Allowance for doubtful accounts ÷ Receivables, gross
= 100 × ÷ =
The allowance for doubtful accounts receivable has exhibited a consistent upward trajectory over the five-year period. Simultaneously, gross receivables have also increased, though the rate of increase has varied. Analysis of the allowance as a percentage of gross receivables reveals fluctuations, with a notable increase in recent years.
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts increased from US$840 million in 2021 to US$1,821 million in 2025. This represents a growth of approximately 116.8% over the period. The largest single-year increase occurred between 2022 and 2023, with an addition of US$276 million. Growth slowed between 2023 and 2024, and again between 2024 and 2025, though the allowance continued to rise.
- Gross Receivables
- Gross receivables have also increased over the period, rising from US$14,280 million in 2021 to US$23,363 million in 2025. This represents an overall increase of approximately 63.4%. The most substantial year-over-year growth in gross receivables was observed between 2021 and 2022 (US$2,728 million), and again between 2024 and 2025 (US$2,609 million).
- Allowance as a Percentage of Gross Receivables
- This ratio began at 5.88% in 2021, decreased slightly to 5.67% in 2022, and then increased to 6.49% in 2023. A significant rise was then observed in 2024, reaching 8.11%. The ratio decreased slightly in 2025 to 7.79%, but remained considerably higher than the levels seen in 2021 and 2022. The increase in this percentage suggests a growing proportion of receivables are deemed potentially uncollectible, despite the overall growth in receivables.
The concurrent increases in both the allowance for doubtful accounts and gross receivables suggest overall business growth. However, the increasing percentage of the allowance relative to gross receivables warrants further investigation. This trend could indicate a deterioration in the quality of receivables, a more conservative approach to estimating uncollectible accounts, or changes in the customer base or collection practices.