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 Liquidity Ratios
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Debt to Equity since 2005
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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 × Allowances ÷ Accounts receivable, gross
= 100 × ÷ =
- Accounts Receivable, Gross
- The gross accounts receivable exhibited a consistent upward trend over the five-year period, increasing from 663,200 thousand USD in 2020 to 1,256,100 thousand USD in 2024. This growth reflects a steady rise in amounts owed by customers, indicating either expanded sales volume or potentially extended credit terms.
- Allowances
- Allowances for doubtful accounts also increased each year, rising from 17,700 thousand USD in 2020 to 30,700 thousand USD in 2024. This increase aligns with the growth in accounts receivable, suggesting an adjustment in provisions to reflect the higher absolute credit exposure.
- Allowance as a Percentage of Accounts Receivable, Gross
- The allowance as a percentage of gross accounts receivable showed a slight decline from 2.67% in 2020 to 2.32% in 2022, before modestly rising to 2.44% in 2024. This indicates a general trend of marginally improved credit quality or collection efficiency over the earlier years, followed by a slight increase in perceived credit risk or conservative provisioning in the later periods.
- Overall Analysis
- While both accounts receivable and allowance balances increased substantially in nominal terms, the proportionate allowance against gross accounts receivable largely remained stable with minor fluctuations. This steadiness in percentage terms suggests consistent management policies regarding credit risk, despite the growth in sales or receivables. The overall data implies that the company is managing its credit risks prudently in the context of expanding receivables.
Allowance for Credit Losses
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 investment in sales-type leases, before allowance for credit loss = 100 × Allowance for credit loss ÷ Investment in sales-type leases, before allowance for credit loss
= 100 × ÷ =
The data reveals several important trends regarding the company's financial position related to credit losses and sales-type lease investments over the five-year period from 2020 to 2024.
- Allowance for Credit Loss
- The allowance for credit loss consistently decreased from US$4.4 million in 2020 to US$2.6 million in 2024. This declining trend indicates an improving situation or possibly more stringent credit risk management, resulting in a reduced need to reserve as much for potential credit losses.
- Investment in Sales-Type Leases, Before Allowance for Credit Loss
- The investment in sales-type leases increased significantly from US$275 million in 2020 to a peak of US$435 million in 2022, followed by a decline to approximately US$379.5 million in 2024. While the investment expanded substantially in the initial years, there is a noticeable contraction after 2022, which may reflect changes in business activity or strategic adjustments to the lease portfolio.
- Allowance as a Percentage of Investment in Sales-Type Leases
- The allowance ratio showed a downward trend from 1.6% in 2020 to below 1% from 2021 through 2024. The percentage dropped sharply from 1.6% to 0.92% in 2021 and further declined to levels around 0.7% thereafter. This indicates an improving credit quality of the lease portfolio relative to its size, as the proportion allocated for potential losses decreased even as the investment level varied.
Overall, the data points to enhanced credit risk management or better credit quality in lease investments, with the allowance for credit losses decreasing both in absolute terms and as a proportion of sales-type lease investments over the years. The initial growth in lease investments suggests business expansion or increased leasing activity until 2022, followed by a moderate reduction in subsequent years.