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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- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Net Profit Margin since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Allowance as a percentage of receivables, gross = 100 × Allowances for doubtful receivables ÷ Receivables, gross
= 100 × ÷ =
The financial data reveals several pertinent trends concerning the company's receivables and the corresponding allowances for doubtful accounts over the five-year period from 2020 to 2024.
- Allowances for Doubtful Receivables
- The allowance amount has shown variability throughout the years. Starting at 57 million US dollars in 2020, it declined to 47 million in 2021, then increased sharply to 93 million in 2022. Following this peak, the allowance decreased to 69 million in 2023 but rose again to 84 million by the end of 2024. This pattern suggests fluctuating assessments of credit risk or changes in the company's credit policies or customer base quality.
- Receivables, Gross
- Gross receivables exhibited a general upward trend from 10,050 million US dollars in 2020 to a peak of 15,822 million in 2022. A slight reduction to 15,670 million occurred in 2023, followed by a more noticeable decline to 14,807 million in 2024. The initial growth phase might indicate increased sales or extended credit terms, while the later reduction could reflect stricter credit control or decreased sales volume.
- Allowance as a Percentage of Gross Receivables
- The allowance ratio began at 0.57% in 2020, dropping to a low of 0.41% in 2021. It then rose to 0.59% in 2022, dropped again to 0.44% in 2023, and increased back to 0.57% in 2024. This oscillation mirrors the fluctuations in allowance amounts relative to gross receivables, indicating an inconsistent but responsive approach to assessing collectibility risks linked to the outstanding receivables.
Overall, the data reflects a dynamic environment in managing credit risk, with allowances for doubtful receivables adjusting in response to changes in the gross receivables balance. The fluctuations in both the absolute allowance figures and their relative percentages suggest active monitoring and adjustment strategies aimed at maintaining appropriate provisioning levels amidst varying economic or business conditions.
Allowance for Credit Losses
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Allowance as a percentage of recorded investment in finance receivables = 100 × Allowance for credit losses ÷ Recorded investment in finance receivables
= 100 × ÷ =
- Allowance for Credit Losses
- The allowance for credit losses displays a consistent downward trend over the five-year period, decreasing from 1,305 million USD in 2020 to 864 million USD in 2024. A notable decline occurred between 2020 and 2021, followed by a more gradual reduction through to 2024, indicating an ongoing reduction in anticipated credit losses.
- Recorded Investment in Finance Receivables
- The recorded investment in finance receivables exhibits an overall upward trajectory, starting at 98,983 million USD in 2020, dipping to 84,724 million USD in 2021, and then progressively increasing each subsequent year to reach 112,500 million USD by the end of 2024. This suggests growth in finance receivables post-2021 following a decline.
- Allowance as a Percentage of Recorded Investment in Finance Receivables
- The allowance as a percentage of recorded investment shows a steady decline from 1.32% in 2020 to 0.77% in 2024. This gradual reduction implies improving credit quality or more effective credit loss management relative to the size of finance receivables.
- Summary Insight
- Overall, the data reveals that while the company’s finance receivables have grown significantly since the 2021 low point, the corresponding allowance for credit losses has consistently decreased both in absolute terms and relative to receivables. This pattern likely reflects improved credit risk conditions or enhanced credit loss mitigation strategies over the period analyzed.