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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- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
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- Current Ratio since 2012
- Price to Earnings (P/E) since 2012
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Allowance as a percentage of accounts and notes receivable, gross = 100 × Allowances ÷ Accounts and notes receivable, gross
= 100 × ÷ =
- Allowances
- The allowances decreased significantly from 55 million US dollars in 2015 to 22 million in 2018, indicating a reduction in estimated uncollectible accounts over this period. However, in 2019, there was a noticeable increase to 41 million US dollars, suggesting a reversal or adjustment in the previous downward trend.
- Accounts and notes receivable, gross
- The gross accounts and notes receivable exhibited a general upward trend, rising from 4,466 million US dollars in 2015 to 7,417 million in 2019. There was consistent growth year-over-year with a minor decline in 2018, where the value dropped from 6,453 million in 2017 to 5,436 million. This indicates an overall increase in the amount of receivables held over the five-year period, with a temporary dip in 2018.
- Allowance as a percentage of accounts and notes receivable, gross
- This percentage declined steadily from 1.23% in 2015 to a low of 0.40% in 2018, demonstrating improved credit quality or more conservative allowance estimates relative to receivables. In 2019, there was a slight increase to 0.55%, aligning with the rise in absolute allowance amount, indicating a modest increase in the proportion of doubtful accounts relative to total receivables.