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 Reportable Segments
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Operating Profit Margin since 2005
- Current Ratio since 2005
- Price to Earnings (P/E) since 2005
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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, gross = 100 × Allowance for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
The analysis of the provided annual financial data reveals several trends related to the allowance for credit losses and accounts receivable.
- Allowance for Credit Losses
- The allowance for credit losses shows a fluctuating but generally stable trend over the five-year period. Starting at 1,736 thousand US dollars in 2019, it increased to a peak of 2,034 thousand US dollars in 2020, then gradually declined to 1,955 thousand in 2022, before a slight increase to 1,988 thousand in 2023. This indicates a relatively consistent assessment of potential credit losses over time with minor adjustments year-to-year.
- Accounts Receivable, Gross
- Gross accounts receivable experienced significant growth from 364,104 thousand US dollars in 2019 to a peak of 552,761 thousand US dollars in 2021. After this peak, there was a noticeable reduction to 493,100 thousand in 2022 and further to 424,112 thousand in 2023. This pattern indicates an expansion phase in accounts receivable, possibly related to increased sales or extended credit terms, followed by a contraction or improved collections in the latter years.
- Allowance as a Percentage of Gross Accounts Receivable
- The percentage of allowance for credit losses relative to gross accounts receivable declined from 0.48% in 2019 to a low of 0.36% in 2021, reflecting a more optimistic outlook on collectability despite the increase in receivables. However, from 2021 onward, this ratio rose again to 0.47% in 2023, suggesting heightened caution or increased risk assessment concerning credit losses as gross receivables decreased.