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
Steel Dynamics Inc. pages available for free this week:
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Steel Dynamics 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: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowances for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowances for credit losses
- The allowance for credit losses showed fluctuations over the analyzed period. It increased from 15,036 thousand USD in 2017 to a peak of 17,495 thousand USD in 2018, followed by a decline to 8,209 thousand USD in 2020, and further decreased to 6,161 thousand USD in 2021. This declining trend in the later years may indicate improved credit quality or adjustments in estimation practices related to credit risk.
- Accounts receivable, gross
- The gross accounts receivable values exhibited volatility with a notable increase in 2018 to 1,057,715 thousand USD from 861,451 thousand USD in 2017, then a fall in 2019 to 857,245 thousand USD. The figure rose again in 2020 to 976,190 thousand USD and experienced a significant surge in 2021, reaching 1,917,546 thousand USD. The sharp increase in 2021 suggests a substantial rise in credit sales or extended payment terms.
- Allowance as a percentage of accounts receivable, gross
- This percentage decreased steadily over the period, starting at 1.75% in 2017 and gradually declining to 0.32% by 2021. This downward trend indicates that despite fluctuations in the allowance for credit losses and gross accounts receivable, the provision for potential uncollectible accounts has decreased relative to the size of receivables, potentially reflecting improved collection efficiency or reduced credit risk exposure.