Stock Analysis on Net
Stock Analysis on Net

Norfolk Southern Corp. (NYSE:NSC)

This company has been moved to the archive! The financial data has not been updated since April 27, 2022.

Analysis of Bad Debts

Microsoft Excel

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.

Allowance for Doubtful Accounts Receivable

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Allowance for doubtful accounts 8 6 9 7 7
Accounts receivable, gross 984 854 929 1,016 962
Financial Ratio
Allowance as a percentage of accounts receivable, gross1 0.81% 0.70% 0.97% 0.69% 0.73%

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 accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × 8 ÷ 984 = 0.81%

An analysis of the credit loss provisions from 2017 to 2021 indicates a stable and conservative management of bad debt risk. The allowance for doubtful accounts remains consistently low relative to the gross receivables balance, suggesting a high quality of the receivables portfolio and a low historical incidence of defaults.

Gross Accounts Receivable Trends
Gross receivables exhibited moderate volatility over the five-year period. The balance peaked at 1,016 million USD in 2018 before experiencing a downward trend that culminated in a period low of 854 million USD in 2020. A recovery was observed in 2021, with the balance increasing to 984 million USD.
Allowance for Doubtful Accounts
The nominal allowance remained within a tight range, fluctuating between 6 million USD and 9 million USD. The maximum provision was recorded in 2019, while the minimum was noted in 2020, reflecting minor adjustments in the estimated uncollectible portion of receivables.
Allowance as a Percentage of Gross Receivables
The ratio of the allowance to gross receivables remained consistently below 1%, indicating minimal credit exposure. The ratio reached a peak of 0.97% in 2019 and a low of 0.69% in 2018. The stability of this percentage suggests a consistent methodology in estimating credit losses despite the fluctuations in the overall volume of accounts receivable.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.

How can I help you?