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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- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) 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: 2025-12-31), 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).
1 2025 Calculation
Allowance as a percentage of trade receivables, gross = 100 × Allowances ÷ Trade receivables, gross
= 100 × ÷ =
The allowances for doubtful accounts receivable exhibited a fluctuating pattern over the five-year period. Initially decreasing significantly, the allowances then increased before declining substantially. Simultaneously, gross trade receivables generally increased, though with some year-over-year variation. The relationship between these two figures, as expressed by the allowance as a percentage of gross trade receivables, reveals a clear downward trend in the provision for potential bad debts relative to the overall receivables balance.
- Allowances for Doubtful Accounts Receivable
- The allowances began at US$70 million in 2021, decreased to US$42 million in 2022, and then rose to US$79 million in 2023. A subsequent decrease to US$47 million occurred in 2024, followed by a significant reduction to US$23 million in 2025. This indicates a volatile pattern, with substantial decreases occurring in the latter part of the observed period.
- Gross Trade Receivables
- Gross trade receivables increased from US$3,193 million in 2021 to US$3,892 million in 2022. A slight decrease to US$3,540 million was noted in 2023, followed by an increase to US$3,836 million in 2024. The receivables continued to rise, reaching US$4,595 million in 2025. This demonstrates an overall upward trend, despite some intermediate fluctuations.
- Allowance as a Percentage of Gross Trade Receivables
- This ratio started at 2.19% in 2021, falling to 1.08% in 2022. It experienced a partial recovery to 2.23% in 2023, before decreasing again to 1.23% in 2024. By 2025, the ratio had fallen to 0.50%. This consistent decline suggests a decreasing need for a provision against bad debts as a proportion of outstanding receivables, potentially indicating improved credit quality of customers or more aggressive collection practices.
The combined trends suggest that while the absolute value of allowances fluctuated, the company has been progressively reducing its assessment of potential uncollectible accounts relative to its overall receivables balance. This could be due to a variety of factors, including changes in customer mix, improved credit risk assessment, or more effective collection efforts.