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Analysis of Bad Debts
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
|Sep 30, 2017||Sep 30, 2016||Sep 30, 2015||Sep 30, 2014||Sep 30, 2013||Sep 30, 2012|
|Selected Financial Data (USD $ in millions)|
|Allowances for doubtful accounts|
|Allowance as a percentage of receivables, gross1||%||%||%||%||%||%|
Source: Based on data from Emerson Electric Co. Annual Reports
1 Allowance as a percentage of receivables, gross = 100 × Allowances for doubtful accounts ÷ Receivables, gross
= 100 × ÷ = %
|Allowance as a percentage of receivables, gross||Allowance for doubtful accounts divided by the gross accounts receivable.||Emerson Electric Co.'s allowance as a percentage of receivables, gross increased from 2015 to 2016 but then declined significantly from 2016 to 2017.|