Pfizer Inc. (PFE)
Analysis of Bad Debts
Difficulty: Advanced
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.
Receivables Accounting Policy
Trade Accounts Receivable
Trade accounts receivable are stated at their net realizable value. The allowance against gross trade accounts receivable reflects the best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other current information. Trade accounts receivable are written off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.
Source: 10-K (filing date: 2019-02-28).
Allowance for Doubtful Accounts Receivable
Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-29), 10-K (filing date: 2015-02-27).
2018 Calculations
1 Allowance as a percentage of trade accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Trade accounts receivable, gross
= 100 × 541 ÷ 8,566 = 6.32%
| Ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of trade accounts receivable, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | Pfizer Inc.’s allowance as a percentage of trade accounts receivable, gross declined from 2016 to 2017 and from 2017 to 2018. |