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
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
- 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 credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for Credit Losses
- The allowance for credit losses demonstrates a fluctuating trend over the five-year period. It decreased from 1,252 million USD in 2020 to 826 million USD in 2022, representing a significant reduction. However, in the subsequent years, it increased again to 1,017 million USD in 2023 and further to 1,152 million USD in 2024, nearing the initial 2020 level. This pattern suggests an initial improvement in credit loss expectations followed by a reassessment or worsening of anticipated credit risks.
- Accounts Receivable, Gross
- The gross accounts receivable consistently increased during the five years, rising from 25,169 million USD in 2020 to 27,261 million USD in 2024. This steady upward trend indicates a growth in the company's outstanding customer balances, which may reflect increased sales or changes in credit terms.
- Allowance as a Percentage of Gross Accounts Receivable
- This ratio declined from 4.97% in 2020 to a low of 3.26% in 2022, implying that the allowance for credit losses was becoming a smaller proportion of the gross accounts receivable. Subsequently, the percentage rose to 4.23% in 2024. This movement aligns with the changes in allowance for credit losses in absolute terms and indicates a cautious approach in recent years towards provisioning relative to the growing receivables base.