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
- Analysis of Short-term (Operating) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Aggregate Accruals
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
1 2019 Calculation
Allowance as a percentage of receivables, gross = 100 × Allowances ÷ Receivables, gross
= 100 × ÷ =
- Allowances
- The allowance for receivables shows a fluctuating trend over the six-year period. Starting at 114 million USD in 2014, it increased to 128 million USD in 2015, then declined significantly to 92 million USD in 2016. From 2016 to 2017, the allowance remained relatively stable, followed by an increase to 113 million USD in 2018 and a slight decrease to 112 million USD in 2019. This pattern indicates variability in the estimation of doubtful accounts during the period, with notable fluctuations between years.
- Receivables, gross
- Gross receivables exhibit a pronounced downward trend from 2014 through 2016, declining markedly from 5,133 million USD to 2,793 million USD. Following 2016, receivables experienced some recovery, reaching 3,457 million USD in 2018, before decreasing again to 3,097 million USD in 2019. Overall, the gross receivables decreased considerably over the observed period, indicating potential changes in sales volumes, credit policies, or collections efficiency.
- Allowance as a percentage of receivables, gross
- The allowance as a percentage of gross receivables demonstrates an upward trend over the six years. It increased from 2.22% in 2014 to 3.62% in 2019, with some fluctuations in the intermediate years. The percentage rose steadily from 2.22% to 3.29% between 2014 and 2016, then showed slight decreases and increases before reaching its highest point in 2019. This suggests a growing proportion of receivables being identified as potentially uncollectible, reflecting increased credit risk or more conservative provisioning practices.