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
- Cash Flow Statement
- Analysis of Reportable Segments
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Total Asset Turnover since 2006
- Price to Earnings (P/E) since 2006
- Price to Operating Profit (P/OP) since 2006
- Aggregate Accruals
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02).
1 2024 Calculation
Allowance as a percentage of receivables, gross = 100 × Allowance ÷ Receivables, gross
= 100 × ÷ =
The analysis of the financial data reveals several notable trends concerning the allowance for doubtful accounts and gross receivables over the periods provided.
- Allowance for Doubtful Accounts
- The allowance value experienced significant fluctuations. It peaked at 13,200 thousand US dollars in 2020, then sharply declined to reach a low of 2,200 thousand US dollars by early 2023. In the latest period (2024), the allowance increased again to 4,400 thousand US dollars, indicating renewed caution regarding potential credit losses.
- Gross Receivables
- Gross receivables showed variability across the periods. After increasing from 138,200 thousand US dollars in 2019 to 155,100 thousand in 2020, there was a noticeable decrease to 108,900 thousand in 2021. Subsequently, the figure rose again to 156,100 thousand by 2023 before falling sharply to 95,400 thousand in 2024. This oscillation suggests changing sales conditions or customer payment behaviors over time.
- Allowance as a Percentage of Gross Receivables
- This ratio mirrored the changes in both allowance and gross receivables. It peaked at 8.51% in 2020, indicating a relatively high level of expected uncollectible accounts compared to receivables during that year. The ratio then consecutively declined to a low of 1.41% in 2023, reflecting improved receivable quality or more optimistic collection prospects. However, by 2024, the percentage rose again to 4.61%, suggesting increased risk or a more conservative estimation of collectability.
Overall, the data indicates periods of increased credit risk assessment and modifications in sales or collection patterns. The spike in allowance and its ratio in 2020 may have been influenced by external economic factors, while the improvements in the following years suggest recovery or better management of receivables. The recent increases in both allowance and its proportion to receivables in 2024 imply caution about future credit losses or changing market conditions.