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 Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Debt to Equity since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2015-12-26), 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Allowance as a percentage of accounts and notes receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts and notes receivable, gross
= 100 × ÷ =
- Allowance for doubtful accounts
- The allowance for doubtful accounts demonstrated a declining trend from 22 million US dollars in 2011 to a low of 11 million in 2013, followed by a slight increase reaching 16 million in 2015. This indicates initial improvements in the expected collectability of receivables, with some reversal of this trend in later years.
- Accounts and notes receivable, gross
- The gross accounts and notes receivable steadily increased over the period, growing from 308 million US dollars in 2011 to 393 million in 2015. This consistent upward movement suggests expanding sales or credit extensions over the years.
- Allowance as a percentage of accounts and notes receivable, gross
- This percentage decreased sharply from 7.14% in 2011 to 3.33% in 2013, indicating an improvement in the quality or collectability of receivables relative to their gross amount. However, from 2013 onward, it increased moderately to 4.07% by 2015, signaling a slight increase in credit risk or conservative estimation of doubtful accounts in the latter years.