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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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31).
1 2025 Calculation
Allowance as a percentage of trade receivables, gross = 100 × Allowances for credit losses ÷ Trade receivables, gross
= 100 × ÷ =
- Allowances for credit losses
- The allowances for credit losses have shown a consistent upward trend from 409 million USD in 2020 to 557 million USD in 2025. This indicates a gradual increase in the estimated potential credit risk over the six-year period.
- Trade receivables, gross
- Gross trade receivables have increased steadily from 5,960 million USD in 2020 to 9,115 million USD in 2025. This reflects growth in the volume of sales made on credit, which may correspond to expansion in business activities or sales volume.
- Allowance as a percentage of trade receivables, gross
- The allowance for credit losses as a percentage of gross trade receivables has shown a slight overall decline from 6.86% in 2020 to 6.11% in 2025, with some fluctuations in the interim years. This suggests that although the absolute allowance amount increased, it grew at a slightly lower rate compared to gross receivables, implying a relatively stable or slightly improving credit risk profile relative to sales on credit.