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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: 2021-06-21), 10-K (filing date: 2020-06-22), 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: 2016-06-22).
1 2021 Calculation
Allowance as a percentage of trade receivables, gross = 100 × Allowances for doubtful trade receivables ÷ Trade receivables, gross
= 100 × ÷ =
|Financial ratio||Description||The company|
|Allowance as a percentage of trade receivables, gross||Allowance for doubtful accounts divided by the gross accounts receivable.||Oracle Corp.’s allowance as a percentage of trade receivables, gross increased from 2019 to 2020 but then decreased significantly from 2020 to 2021.|