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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- Statement of Comprehensive Income
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
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- Current Ratio since 2005
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2024-12-29), 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 accounts receivable trade, gross = 100 × Allowances for doubtful accounts ÷ Accounts receivable trade, gross
= 100 × ÷ =
- Allowances for doubtful accounts
- The allowances for doubtful accounts show a consistent decline over the five-year period. Starting at 293 million US dollars in 2020, the figure decreases every year, reaching 167 million US dollars by the end of 2024. This downward trend suggests an improvement in the quality of receivables or more effective credit risk management.
- Accounts receivable trade, gross
- The gross accounts receivable balance exhibits some fluctuation over the period. It rises from 13,869 million US dollars in 2020 to a peak of 16,363 million US dollars in 2022, before declining to 15,009 million US dollars by 2024. This indicates that while the company experienced growth in outstanding trade receivables initially, there was a moderation or reduction in the later years.
- Allowance as a percentage of accounts receivable trade, gross
- The allowance as a percentage of gross accounts receivable steadily decreases from 2.11% in 2020 to 1.11% in 2024. This declining ratio aligns with the absolute declines seen in allowances for doubtful accounts and suggests a lower expected credit loss relative to the size of receivables. It reflects positively on the quality of receivables and the effectiveness of credit risk controls over time.