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
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- Cash Flow Statement
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Debt
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 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 fluctuating pattern over the five-year period. Starting at 261 million USD in 2013, it decreased sharply to 152 million USD in 2014, followed by a moderate increase to 180 million USD in 2015. The allowance then continued to rise slightly to 193 million USD in 2016 before declining again to 162 million USD in 2017. Overall, the allowance showed variability without a consistent upward or downward trend.
- Gross Receivables
- Gross receivables showed some volatility but generally trended upward during the period. Beginning at 8,129 million USD in 2013, there was a gradual decline to 7,872 million USD in 2014 and further down to 7,591 million USD in 2015. Subsequently, gross receivables increased substantially to 8,892 million USD in 2016 and further to 9,563 million USD in 2017, representing the highest value in the observed timeframe.
- Allowance as a Percentage of Gross Receivables
- This ratio decreased over the period, indicating a declining proportion of receivables being reserved for doubtful accounts. The percentage started at 3.21% in 2013 and dropped sharply to 1.93% in 2014. It then experienced minor fluctuations, increasing to 2.37% in 2015, decreasing slightly to 2.17% in 2016, and finally reaching a low of 1.69% in 2017. The overall downward trend suggests improved credit quality or more conservative allowance policies relative to total receivables.