Analysis of Bad Debts
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: 2020-07-24), 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23).
1 2020 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for uncollectible accounts receivable ÷ Accounts receivable, gross
= 100 × 214 ÷ 2,963 = 7.22%
|Financial ratio||Description||The company|
|Allowance as a percentage of accounts receivable, gross||Allowance for doubtful accounts divided by the gross accounts receivable.||Nike Inc.’s allowance as a percentage of accounts receivable, gross decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.|