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Analysis of Bad Debts
Advanced level
Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company’s 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 (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).
1 2019 Calculation
Allowance as a percentage of notes and accounts receivable, gross = 100 × Allowances for doubtful notes and accounts receivable ÷ Notes and accounts receivable, gross
= 100 × ÷ =
| Financial ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of notes and accounts receivable, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | International Business Machines Corp.’s allowance as a percentage of notes and accounts receivable, gross increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level. |
Allowance for Credit Losses
Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).
1 2019 Calculation
Allowance as a percentage of financing receivables, gross = 100 × Allowance for credit losses ÷ Financing receivables, gross
= 100 × ÷ =
| Financial ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of financing receivables, gross | Allowance for credit losses divided by the gross financing receivable. | International Business Machines Corp.’s allowance as a percentage of financing receivables, gross decreased from 2017 to 2018 but then slightly increased from 2018 to 2019. |