Eli Lilly & Co. (LLY)

Analysis of Bad Debts

Difficulty: Advanced

Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company's 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.

Allowance for Doubtful Accounts Receivable

Allowance for Doubtful Accounts Receivable

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in thousands)
Allowances for doubtful accounts	38,700	40,300	44,300	55,000	100,300
Accounts receivable, gross	4,585,000	4,069,700	3,557,300	3,289,600	3,534,700
Ratio
Allowance as a percentage of accounts receivable, gross¹	0.84%	0.99%	1.25%	1.67%	2.84%

Based on: 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-19).

2017 Calculations

¹ Allowance as a percentage of accounts receivable, gross = 100 × Allowances for doubtful accounts ÷ Accounts receivable, gross
= 100 × 38,700 ÷ 4,585,000 = 0.84%

Ratio	Description	The company
Allowance as a percentage of accounts receivable, gross	Allowance for doubtful accounts divided by the gross accounts receivable.	Eli Lilly & Co.'s allowance as a percentage of accounts receivable, gross declined from 2015 to 2016 and from 2016 to 2017.