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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- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Enterprise Value to FCFF (EV/FCFF)
- Selected Financial Data since 2008
- Net Profit Margin since 2008
- Total Asset Turnover since 2008
- Price to Operating Profit (P/OP) since 2008
- Analysis of Revenues
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Allowance as a percentage of trade receivables, gross = 100 × Allowances ÷ Trade receivables, gross
= 100 × ÷ =
- Allowances
- The allowances fluctuated over the five-year period, starting at 23 million USD in 2020, then experiencing a sharp increase to 70 million USD in 2021. This was followed by a decline to 42 million USD in 2022, a subsequent rise to 79 million USD in 2023, and finally a decrease to 47 million USD in 2024. The pattern indicates volatility without a clear upward or downward long-term trend.
- Trade receivables, gross
- The gross trade receivables displayed an overall upward trend from 2020 to 2024. The amounts grew from 2,928 million USD in 2020 to a peak of 3,892 million USD in 2022. This was followed by a dip to 3,540 million USD in 2023 and a recovery to 3,836 million USD in 2024. Despite year-to-year fluctuations, the general direction over the period was growth.
- Allowance as a percentage of trade receivables, gross
- The allowance as a proportion of gross trade receivables showed variability during these years. It started at 0.79% in 2020, surged to 2.19% in 2021, then decreased to 1.08% in 2022. The ratio again increased to 2.23% in 2023 before dropping to 1.23% in 2024. This indicates periodic adjustments in allowance levels relative to receivables, with spikes suggesting moments of increased perceived risk or conservatism in allowance estimation.
- Summary of trends and insights
- Overall, the data suggests the company experienced growth in gross trade receivables, reflecting potentially increased sales or credit extended to customers. However, the allowances for doubtful accounts have been volatile, with no consistent trend, implying variable credit risk assessments or changes in collection experience over time. The oscillations in allowance percentages relative to gross receivables further underline fluctuating expectations regarding credit losses. Such variations may warrant a closer examination of credit policies or customer profiles to better understand the drivers behind the changing allowance estimations.