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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- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Price to FCFE (P/FCFE)
- Operating Profit Margin since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
- Analysis of Debt
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Allowance as a percentage of trade receivables, gross = 100 × Allowance for credit losses ÷ Trade receivables, gross
= 100 × ÷ =
- Allowance for credit losses
- Over the five-year period, the allowance for credit losses increased significantly from 17 million US dollars in 2018 to 60 million in 2019, followed by a further rise to 82 million in 2020. After peaking in 2020, it slightly decreased to 76 million in 2021 and remained relatively stable at 75 million in 2022.
- Trade receivables, gross
- Gross trade receivables showed a considerable upward trend from 1,489 million US dollars in 2018 to 3,302 million in 2019, marking more than a twofold increase. Subsequent years saw continued growth, with values rising to 3,396 million in 2020 and peaking at 3,848 million in 2021. However, there was a slight decline to 3,774 million in 2022.
- Allowance as a percentage of trade receivables, gross
- The allowance as a percentage of gross trade receivables increased from 1.14% in 2018 to 1.82% in 2019, continuing to rise to 2.41% in 2020. After this peak, the percentage declined to 1.98% in 2021 and stabilized at 1.99% in 2022. This pattern reflects a proportionally higher provision for credit losses relative to receivables during 2020, with a moderated but steady allowance ratio in the subsequent years.