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.
Paying user area
Try for free
First Solar Inc. pages available for free this week:
- Income Statement
- Cash Flow Statement
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Total Asset Turnover since 2006
- Price to Earnings (P/E) since 2006
- Price to Sales (P/S) since 2006
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to First Solar Inc. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
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 trade, gross = 100 × Allowance for credit losses ÷ Accounts receivable trade, gross
= 100 × ÷ =
- Allowance for Credit Losses
- The allowance for credit losses shows variability over the five-year period. It increased significantly from 1,386 thousand USD in 2019 to 3,009 thousand USD in 2020, indicating a heightened estimation of potential credit risk during that year. Subsequently, the allowance declined sharply to 664 thousand USD in 2021, before rising again in 2022 to 1,042 thousand USD and further increasing to 1,614 thousand USD in 2023. This pattern suggests fluctuating assessments of credit risk, possibly influenced by changes in economic conditions or internal credit policies.
- Accounts Receivable Trade, Gross
- The gross accounts receivable exhibited considerable fluctuations across the periods. Starting at 476,425 thousand USD in 2019, there was a substantial decline to 269,095 thousand USD in 2020, followed by a strong recovery to 430,100 thousand USD in 2021. The amount then decreased to 325,379 thousand USD in 2022, before rising sharply to a record high of 662,390 thousand USD in 2023. These swings indicate varying levels of sales on credit or changes in collection efficiency over time.
- Allowance as a Percentage of Accounts Receivable Trade, Gross
- The allowance as a percentage of gross accounts receivable demonstrates a distinctive trend. It was relatively low at 0.29% in 2019, increased markedly to 1.12% in 2020, corresponding with the rise in absolute allowance. In 2021, this ratio dropped significantly to 0.15%, reflecting the decline in allowance relative to the gross receivables. In 2022 and 2023, the percentage stabilized around 0.32% and 0.24%, respectively, indicating a more moderate and controlled approach toward credit loss provisioning in relation to the accounts receivable balance.
- Overall Assessment
- The data reveals that credit risk management has experienced notable adjustments during the period under review, with significant shifts in both the absolute allowance for credit losses and its relative size compared to gross accounts receivable. The large fluctuations in gross accounts receivable suggest varying operational dynamics or external market influences impacting credit sales. The trends indicate a responsive adjustment of credit loss reserves aligned with these fluctuations, with a tendency toward conservative provisioning in 2020 and more stabilized ratios in recent years.