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Medtronic PLC (NYSE:MDT)
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.
Accounting Policy on Receivables
Accounts Receivable and Allowance for Doubtful Accounts
Medtronic grants credit to customers in the normal course of business and maintains an allowance for doubtful accounts for potential credit losses. When evaluating allowances for doubtful accounts, Medtronic considers various factors, including historical experience and customer-specific information. Uncollectible accounts are written-off against the allowance when it is deemed that a customer account is uncollectible.
Source: 10-K (filing date: 2019-06-21).
Allowance for Doubtful Accounts Receivable
Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).
1 2019 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
| Financial ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of accounts receivable, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | Medtronic PLC’s allowance as a percentage of accounts receivable, gross increased from 2017 to 2018 but then slightly decreased from 2018 to 2019. |