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
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Dividend Discount Model (DDM)
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
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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 receivables, gross = 100 × Allowance for doubtful accounts ÷ Receivables, gross
= 100 × ÷ =
- Allowance for doubtful accounts
- The allowance for doubtful accounts exhibited a gradual increase from 301 million US dollars in 2020 to a peak of 340 million US dollars in 2022. Subsequently, it showed a slight decline to 337 million in 2023 and further reduced to 325 million in 2024. This indicates some improvement in credit risk management or collection efficiency in the latter years.
- Receivables, gross
- Gross receivables increased steadily over the five-year period. Starting at 5548 million US dollars in 2020, there was a consistent growth each year, reaching 8336 million US dollars by 2024. The largest increase occurred between 2021 and 2022, where receivables rose from 5634 to 7372 million US dollars, reflecting significant growth in business volume or extended credit terms.
- Allowance as a percentage of receivables, gross
- This ratio showed a clear downward trend, decreasing from 5.43% in 2020 to 3.9% in 2024. The percentage dropped notably after 2021, reaching the lowest point in 2024. This decline suggests a relative improvement in the quality of receivables, indicating that a smaller proportion of the total receivables is expected to be uncollectible over time.