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 Reportable Segments
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- Capital Asset Pricing Model (CAPM)
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- Analysis of Revenues
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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 accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts demonstrates a general increasing trend over the observed period. It rose significantly from 4,800 thousand US dollars in 2018 to 14,300 thousand US dollars in 2022. Notably, a substantial increase occurred between 2019 and 2020, from 7,700 to 12,500 thousand US dollars, followed by a slight decline in 2021 to 10,600 thousand US dollars, and an increase again in 2022.
- Accounts Receivable, Gross
- Gross accounts receivable shows a decline from 730,200 thousand US dollars in 2018 to 647,200 thousand US dollars in 2020. However, it then increased steadily over the next two years, reaching 755,900 thousand US dollars by the end of 2022. This suggests a recovery and growth phase after an initial contraction.
- Allowance as a Percentage of Accounts Receivable, Gross
- The allowance as a percentage of gross accounts receivable increased markedly from 0.66% in 2018 to 1.93% in 2020, indicating a higher provision relative to receivables, possibly due to increasing credit risk concerns or changes in credit policy. This ratio then decreased to 1.55% in 2021 before rising again to 1.89% in 2022, implying fluctuations in the expected uncollectible amounts relative to outstanding receivables.
- Overall Insights
- Over the five-year period, the allowance for doubtful accounts consistently increased in nominal terms, reflective of a more cautious stance on credit risk or deteriorating credit quality. The gross accounts receivable first decreased and then recovered, indicating possible variations in sales or collection efficiencies. The allowance as a percentage of gross receivables mirrors this cautious trend, peaking in 2020, slightly easing in 2021, and rising again by 2022, suggesting ongoing scrutiny in credit risk management.