Linde plc (LIN)

Analysis of Bad Debts

High level of difficulty

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

Allowance for Doubtful Accounts Receivable

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (US$ in millions)
Allowance for doubtful accounts	113	138	121	101	102
Accounts receivable, gross	4,410	1,942	1,762	1,702	1,898
Ratio
Allowance as a percentage of accounts receivable, gross¹	2.56%	7.11%	6.87%	5.93%	5.37%

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

¹ Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × 113 ÷ 4,410 = 2.56%

Ratio	Description	The company
Allowance as a percentage of accounts receivable, gross	Allowance for doubtful accounts divided by the gross accounts receivable.	Linde plc’s allowance as a percentage of accounts receivable, gross increased from 2016 to 2017 but then declined significantly from 2017 to 2018.