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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- Cash Flow Statement
- Common-Size Income Statement
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value (EV)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
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Allowance for Doubtful Accounts Receivable
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Allowance as a percentage of receivables, gross = 100 × Allowance for doubtful accounts ÷ Receivables, gross
= 100 × ÷ =
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts shows a consistent upward trend over the five-year period. It increased from $574 million in 2020 to $1,683 million in 2024, indicating a rising estimation of potential credit losses. The growth rate appears to accelerate notably from 2022 onward.
- Gross Receivables
- Gross receivables similarly exhibit steady growth each year, rising from $11,532 million in 2020 to $20,754 million in 2024. The increase reflects an expanding amount of receivables outstanding, suggesting possibly higher sales or services rendered on credit.
- Allowance as a Percentage of Gross Receivables
- This ratio has increased from 4.98% in 2020 to 8.11% in 2024, indicating a growing proportion of receivables being reserved for doubtful accounts. After a slight dip in 2022, the ratio rose substantially in 2023 and 2024, implying a more conservative approach to credit risk or deteriorating credit quality over time.
- Summary of Trends
- The data reveals that as gross receivables grow, the company has also proportionally increased its allowance for doubtful accounts at an accelerating pace in recent years. The rising allowance percentage suggests heightened caution regarding collectability and possibly reflects a response to changing economic or credit conditions affecting customers’ ability to pay.