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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- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
1 2024 Calculation
Allowance as a percentage of receivables, gross = 100 × Allowance for credit losses ÷ Receivables, gross
= 100 × ÷ =
- Allowance for credit losses
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The allowance for credit losses exhibited a general upward trend from 2019 through 2023, rising from 121 million USD to a peak of 472 million USD in 2023. However, a decline to 436 million USD was observed in 2024, indicating a slight reduction in the provision for potential credit losses after several years of increase.
- Receivables, gross
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Gross receivables increased steadily between 2019 and 2021, reaching a high of 12,427 million USD. This was followed by a decline in 2022 to 12,203 million USD, and further decline in 2023 and 2024 to 10,660 million USD and 10,523 million USD respectively, indicating a contraction in the amount of credit extended or outstanding receivables in the most recent years.
- Allowance as a percentage of receivables, gross
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This ratio rose from 1.31% in 2019 to a peak of 4.43% in 2023, reflecting an increasing proportion of receivables being reserved for potential credit losses, likely indicative of a more cautious credit risk assessment or deteriorating credit quality. A slight decrease to 4.14% in 2024 suggests some improvement in credit conditions or a recalibration of the allowance policy relative to gross receivables, though the percentage remains substantially elevated compared to earlier years.