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
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2012
- Return on Assets (ROA) since 2012
- Analysis of Debt
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Allowance for Doubtful Accounts Receivable
Based on: 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), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts has exhibited a fluctuating but generally declining trend over the five-year period. It decreased from 21 million USD in 2019 to 18 million USD in 2023, with a noted low of 17 million USD in 2021 before slightly increasing again in 2022.
- Accounts Receivable, Gross
- Gross accounts receivable have shown consistent growth throughout the period, increasing from 1107 million USD in 2019 to 1322 million USD in 2023. This represents a gradual upward trajectory year over year, indicating expanding credit sales or receivables volume within the company.
- Allowance as a Percentage of Accounts Receivable, Gross
- The allowance for doubtful accounts as a percentage of gross accounts receivable has steadily decreased, starting at 1.9% in 2019 and reaching 1.36% in 2023. This decline suggests improvements in credit quality or collection efficiency, as the provision for potential uncollectible accounts is becoming a smaller fraction of the total receivables.
- Overall Assessment
- The data suggests a positive trend in managing credit risk and receivables. Despite an increase in gross accounts receivable, the relatively stable or slightly declining allowance for doubtful accounts, both in absolute terms and as a percentage, points to effective credit policies or improving customer payment behavior. The company appears to retain increasing receivables without a corresponding rise in doubtful amounts, which may signal strong financial health in this area.