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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- Cash Flow Statement
- Common-Size Income Statement
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Capital Asset Pricing Model (CAPM)
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) 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 × Receivables allowances ÷ Receivables, gross
= 100 × ÷ =
- Receivables Gross
- There is a consistent upward trend in gross receivables over the analyzed period. The values increased from 27,441 million USD in 2020 to 52,303 million USD in 2024, nearly doubling in five years. This indicates a significant expansion in the company's outstanding amounts to be collected.
- Receivables Allowances
- The allowances for receivables also increased steadily, rising from 2,037 million USD in 2020 to 3,849 million USD in 2024. Although the absolute values increased, the rate of increase is slower relative to gross receivables.
- Allowance as Percentage of Gross Receivables
- This ratio decreased from 7.42% in 2020 to a low of 6.48% in 2021, suggesting an improvement in expected collectibility or credit quality at that time. However, from 2021 onwards, the percentage gradually rose back to 7.36% by 2024, nearly reaching the initial level observed in 2020. This pattern reflects a slight deterioration or normalization in the allowance relative to total receivables after the initial improvement.
- Overall Analysis
- The company's receivables have grown substantially, indicating increased business activity or sales on credit. The allowances, while also increasing, did not keep pace proportionally, leading to a temporary reduction in the allowance ratio. The recent gradual rise in this ratio toward the original level might imply growing caution or increased risk in collection. Monitoring the allowance ratio alongside the growth in receivables is crucial to assess credit risk and the effectiveness of receivables management.