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.
Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 Calculation
Allowance as a percentage of accounts and notes receivable, gross = 100 × Allowance ÷ Accounts and notes receivable, gross
= 100 × 244 ÷ 13,298 = 1.83%
The allowance for doubtful accounts receivable exhibited fluctuating behavior over the five-year period. Initially, the allowance increased significantly, followed by a period of relative stability and then a decline. Simultaneously, gross accounts and notes receivable experienced substantial growth followed by a slight decrease and subsequent stabilization. The relationship between these two figures, as expressed by the allowance as a percentage of gross receivables, reveals a decreasing trend overall, with some intermediate variations.
- Allowance for Doubtful Accounts
- The allowance began at US$192 million in 2021 and rose to US$260 million in 2022, representing a 35.4% increase. Further growth was observed in 2023, reaching US$298 million. The allowance peaked at US$313 million in 2024 before decreasing to US$244 million in 2025, a decline of 22.1% from the 2024 value. This suggests a potential shift in credit risk assessment or collection efforts towards the end of the period.
- Gross Accounts and Notes Receivable
- Gross accounts and notes receivable increased considerably from US$7,586 million in 2021 to US$13,593 million in 2022, a growth of 79.3%. A slight decrease was noted in 2023, with the balance falling to US$12,676 million. The receivable balance then stabilized, reaching US$13,140 million in 2024 and US$13,298 million in 2025. This indicates a period of rapid sales growth followed by a leveling off of credit exposure.
- Allowance as a Percentage of Gross Receivables
- This ratio began at 2.53% in 2021, decreased to 1.91% in 2022, and then rose to 2.35% in 2023 and 2.38% in 2024. Finally, the ratio decreased to 1.83% in 2025. The overall trend is downward, indicating that the allowance is becoming a smaller proportion of the total outstanding receivables. This could be due to improved credit quality of customers, more effective collection processes, or a change in the company’s accounting policies regarding bad debt estimation. The fluctuations suggest that the relationship between the allowance and receivables is not consistently linear.
The observed patterns suggest a dynamic relationship between credit risk, sales volume, and the company’s approach to managing potential uncollectible accounts. The decrease in the allowance percentage in the later years, despite a relatively stable receivable balance, warrants further investigation to understand the underlying drivers and potential implications for future financial performance.
Allowance for Credit Losses
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 Calculation
Allowance as a percentage of gM Financial receivables = 100 × Allowance for loan losses ÷ GM Financial receivables
= 100 × 2,725 ÷ 92,374 = 2.95%
The allowance for loan losses exhibited a consistent upward trajectory between 2021 and 2025. Simultaneously, GM Financial receivables increased substantially over the same period, though with a slight decrease observed in the most recent year. The relationship between these two figures, as represented by the allowance as a percentage of GM Financial receivables, reveals a more nuanced pattern.
- Allowance for Loan Losses
- The allowance for loan losses increased from US$1,886 million in 2021 to US$2,725 million in 2025. This represents a cumulative increase of approximately 44.5%. The growth was relatively steady year-over-year, suggesting a consistent approach to provisioning for potential credit losses.
- GM Financial Receivables
- GM Financial receivables demonstrated significant growth, rising from US$64,702 million in 2021 to US$95,294 million in 2024. However, a slight decrease to US$92,374 million was noted in 2025. This suggests a potential stabilization or minor contraction in financing activity during the latest period.
- Allowance as a Percentage of GM Financial Receivables
- This ratio initially decreased from 2.91% in 2021 to 2.58% in 2024, indicating that the allowance for loan losses was not increasing as rapidly as receivables. This could be attributed to factors such as improved credit quality of the borrower pool or a change in risk assessment methodologies. However, the ratio increased to 2.95% in 2025, coinciding with the decrease in receivables. This suggests a more conservative approach to provisioning in light of the receivables adjustment, or potentially an anticipation of increased credit risk.
Overall, the observed trends suggest a growing portfolio of GM Financial receivables, coupled with a generally increasing, but proportionally fluctuating, allowance for loan losses. The slight decrease in receivables in 2025, combined with the increase in the allowance percentage, warrants further investigation to determine the underlying causes and potential implications for future credit performance.