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
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
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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 × Allowances ÷ Accounts receivable, gross
= 100 × ÷ =
The allowance for doubtful accounts receivable exhibited an overall increasing trend from 2021 to 2023, followed by a slight decrease in 2025. Simultaneously, gross accounts receivable demonstrated consistent growth throughout the observed period. The relationship between these two figures, as indicated by the allowance as a percentage of gross accounts receivable, reveals fluctuations in the company’s assessment of credit risk.
- Allowance for Doubtful Accounts
- The allowance increased from US$20.2 million in 2021 to US$27.1 million in 2023, representing a cumulative increase of 34.2%. This suggests a growing expectation of uncollectible accounts during this timeframe. A minor decline to US$29.9 million was noted in 2025, potentially indicating improved collection efforts or a revised credit risk assessment.
- Gross Accounts Receivable
- Gross accounts receivable experienced substantial growth, rising from US$802.9 million in 2021 to US$1,557.2 million in 2025. This represents a 94.2% increase over the five-year period, indicating increased sales and/or extended credit terms. The consistent growth suggests a healthy expansion of credit sales.
- Allowance as a Percentage of Gross Accounts Receivable
- This ratio began at 2.52% in 2021, decreased to 2.32% in 2022, and remained relatively stable at 2.34% in 2023. An increase to 2.44% in 2024 was observed before declining to 1.92% in 2025. The initial decrease may reflect improved credit quality or more efficient collection processes. The subsequent increase in 2024 could indicate emerging credit risks, while the decrease in 2025 might suggest a reassessment of those risks or successful mitigation strategies. The 2025 value represents the lowest percentage over the observed period.
The growth in gross accounts receivable outpaced the growth in the allowance for doubtful accounts for much of the period, which initially led to a decreasing percentage. However, the fluctuations in the percentage indicate a dynamic assessment of credit risk. The decrease in the percentage in 2025 warrants further investigation to determine the underlying factors contributing to the improved collection outlook.
Allowance for Credit Losses
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 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 allowance for credit loss decreased steadily from 2021 to 2023, then stabilized. Simultaneously, the investment in sales-type leases exhibited fluctuations over the same period. A review of the allowance as a percentage of the investment in sales-type leases provides further insight into the relationship between these two figures.
- Allowance for Credit Loss
- The allowance for credit loss began at US$3,600 thousand in 2021 and experienced a consistent decline, reaching US$2,700 thousand by 2023. From 2023 to 2025, the allowance remained stable at US$2,600 thousand. This suggests a potential shift in the company’s assessment of credit risk, followed by a period of consistent risk assessment.
- Investment in Sales-Type Leases
- The investment in sales-type leases increased from US$392,600 thousand in 2021 to US$435,000 thousand in 2022. A decrease was then observed in 2023, falling to US$371,600 thousand, before a slight increase to US$379,500 thousand in 2024. By 2025, the investment had decreased further to US$302,800 thousand. This indicates variability in leasing activity over the five-year period.
- Allowance as a Percentage of Investment
- In 2021, the allowance for credit loss represented 0.92% of the investment in sales-type leases. This percentage decreased to 0.69% in 2022 and remained relatively stable at 0.73% in 2023, then decreased again to 0.69% in 2024. An increase to 0.86% was observed in 2025. The initial decline suggests a decreasing level of perceived risk relative to the investment, while the 2025 increase may indicate a reassessment of risk or a change in the composition of the lease portfolio.
The stabilization of the allowance for credit loss in the latter years, coupled with the decreasing investment in sales-type leases, warrants further investigation. The increase in the allowance percentage in 2025, despite the lower investment, could be a key indicator requiring additional scrutiny.