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: Assets
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2019
- Price to Earnings (P/E) since 2019
- Price to Sales (P/S) since 2019
- Aggregate Accruals
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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 doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
- Accounts Receivable, Gross
- The gross accounts receivable demonstrate a substantial upward trend over the observed period. Starting at 1,128 million USD in 2020, they rose sharply to 2,490 million USD in 2021, followed by continued growth reaching 3,495 million USD in 2023 before a slight decline to 3,428 million USD in 2024. This overall increasing pattern indicates an expansion in credit sales or outstanding customer balances.
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts also shows an increasing trend, albeit at a more moderate pace compared to gross accounts receivable. It increased from 55 million USD in 2020 to 80 million USD in 2022, then further to 91 million USD in 2023 and 95 million USD in 2024. This suggests a growing recognition of potential credit losses in line with increasing receivables, though the growth in the allowance is less pronounced relative to accounts receivable.
- Allowance as a Percentage of Accounts Receivable, Gross
- This ratio decreased significantly from 4.88% in 2020 to 2.05% in 2021, indicating a lower proportion of receivables considered doubtful despite the growth in total receivables. Subsequently, it modestly increased again to 2.8% in 2022, then slightly decreased to 2.6% in 2023 before a minor rise to 2.77% in 2024. Overall, this ratio remains well below the initial 2020 level, reflecting a generally improved or more optimistic credit risk assessment relative to the size of gross receivables.
- Overall Insights
- The data suggests that while total accounts receivable have grown significantly, the company's provision for doubtful accounts has not increased at the same rate, leading to a declining proportion of allowance relative to total receivables after 2020. This may imply better credit management, improved customer payment behavior, or revised estimation policies. The slight increase in the allowance ratio in recent years could reflect caution in response to changing market conditions or expected credit risks.