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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- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Current Ratio since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
- Aggregate Accruals
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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 doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for doubtful accounts
- The allowance for doubtful accounts increased steadily from 33,600 thousand USD in 2019 to 68,400 thousand USD in 2023. The most notable rises occurred between 2020 and 2022, reflecting a nearly doubling of the allowance in this period. This indicates a growing expectation of uncollectible receivables over the five-year span.
- Accounts receivable, gross
- Gross accounts receivable showed consistent growth from 1,770,000 thousand USD in 2019 to a peak of 2,695,200 thousand USD in 2022, then slightly declined to 2,686,800 thousand USD in 2023. This trend suggests an expansion in credit sales or outstanding balances followed by a minor contraction in the latest year.
- Allowance as a percentage of accounts receivable, gross
- The allowance ratio fluctuated over the period, starting at 1.9% in 2019, rising to 2.24% in 2020, then decreasing to 1.74% in 2021, before increasing again to reach 2.55% in 2023. This variation indicates changes in the management’s estimate of credit risk and potential uncollectibility, with a higher provisioning trend from 2021 to 2023, aligning with the increases in absolute allowance values.
- Overall analysis
- The data points to an increasing cautiousness toward credit risk over the analyzed years, as evidenced by the rising allowance and its share relative to gross accounts receivable. Despite the growth in gross receivables, the proportional allowance has generally trended upward, particularly notable in the later years. This could reflect changing market or economic conditions influencing the credit quality of the receivables portfolio.