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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- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Price to Earnings (P/E) since 2005
- 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 accounts receivable, gross = 100 × Allowance for expected credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for Expected Credit Losses
- The allowance for expected credit losses exhibits a consistent downward trend over the five-year period. Starting at US$546 million in 2020, it decreased each year, reaching US$289 million by the end of 2024. This suggests a gradual reduction in anticipated credit risk or improved credit quality in the accounts receivable portfolio.
- Accounts Receivable, Gross
- Gross accounts receivable demonstrate some fluctuations with a general inclining trend. From US$9,800 million in 2020, there was an increase to US$10,136 million in 2021, a slight decline to US$9,560 million in 2022, followed by a rise to US$11,154 million in 2023, and a further modest increase to US$11,265 million in 2024. This pattern indicates variability in sales or credit sales volume, but a general increase compared to the initial year.
- Allowance as a Percentage of Accounts Receivable, Gross
- The allowance as a percentage of gross accounts receivable has steadily decreased over the period. Beginning at 5.57% in 2020, it declined consistently each year to reach 2.57% in 2024. This downward trend suggests management's expectation of reduced credit losses relative to the size of receivables, possibly reflecting improved collection efforts or a higher quality customer base.