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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- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Total Asset Turnover since 2005
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- Price to Sales (P/S) since 2005
- Analysis of Debt
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses on accounts receivable ÷ Accounts receivable, gross
= 100 × ÷ =
The allowance for credit losses on accounts receivable exhibited an overall increasing trend from 2021 to 2025. While not consistently upward each year, the balance grew from US$550 million to US$924 million over the five-year period. Accounts receivable, gross, also demonstrated a consistent upward trend, increasing significantly from US$39,854 million in 2021 to US$63,810 million in 2025.
- Allowance for Credit Losses
- The allowance for credit losses increased by 36.7% between 2021 and 2022, representing the largest single-year increase in the observed period. Growth slowed in subsequent years, with increases of 2.1% between 2022 and 2023, 13.9% between 2023 and 2024, and 5.1% between 2024 and 2025. This suggests a potential moderation in the rate of perceived credit risk after the initial increase.
- Accounts Receivable, Gross
- Accounts receivable, gross, experienced substantial growth throughout the period. The largest year-over-year increase occurred between 2024 and 2025, with a rise of 19.9%. Prior to this, growth was 13.0% between 2023 and 2024, and 9.5% between 2022 and 2023. This consistent growth indicates expanding sales or changes in credit terms.
- Allowance as a Percentage of Accounts Receivable, Gross
- The allowance as a percentage of accounts receivable, gross, initially increased from 1.38% in 2021 to 1.84% in 2022, indicating a heightened concern regarding collectibility relative to outstanding receivables. This percentage then decreased to 1.58% in 2023, before increasing to 1.65% in 2024. The percentage concluded the period at 1.45% in 2025. The fluctuations suggest a dynamic assessment of credit risk, potentially influenced by changes in the customer base, economic conditions, or collection efforts. Despite the increase in the absolute allowance amount, the percentage of receivables covered by the allowance has not shown a consistent upward trend, indicating that the growth in the allowance has generally kept pace with the growth in gross accounts receivable.
In summary, both the allowance for credit losses and gross accounts receivable increased over the five-year period. The percentage of the allowance relative to gross receivables fluctuated, suggesting an evolving assessment of credit risk, but remained relatively stable overall.