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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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Geographic Areas
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Total Asset Turnover since 2005
- Price to Book Value (P/BV) since 2005
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Allowance for Doubtful Accounts Receivable
Based on: 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), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Allowance as a percentage of receivables, gross = 100 × Allowance for doubtful accounts ÷ Receivables, gross
= 100 × ÷ =
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts shows a fluctuating trend over the five-year period. It decreased significantly from 2300 thousand USD in 2017 to 1300 thousand USD in 2018, then increased sharply to 3500 thousand USD in 2019. Subsequently, it declined markedly to 400 thousand USD in 2020 and slightly rose to 500 thousand USD in 2021.
- Receivables, Gross
- Gross receivables exhibited an overall upward trend during the period. The amount rose from 644.9 million USD in 2017 to 839.8 million USD in 2018. This was followed by a modest decrease to 807.4 million USD in 2019, then increased again to 881.5 million USD in 2020. A pronounced surge occurred in 2021, reaching 1.5324 billion USD.
- Allowance as a Percentage of Receivables, Gross
- The allowance as a percentage of gross receivables decreased steadily over the entire period. It started at 0.36% in 2017, dropped sharply to 0.15% in 2018, then increased to 0.43% in 2019. Afterward, it declined substantially to 0.05% in 2020 and further to a low of 0.03% in 2021, indicating a decreasing proportion of doubtful accounts relative to total receivables.
- Overall Analysis
- The data reveals that while gross receivables grew notably—especially with a significant jump in 2021—the company has concurrently decreased its allowance for doubtful accounts both in absolute terms and as a percentage of gross receivables. This suggests increased confidence in the collectibility of receivables or improved credit management practices over time. The spike in the allowance in 2019 may reflect a temporary concern about credit risk during that year. The subsequent sharp reductions imply that such concerns were either resolved or reassessed more optimistically in the following years.