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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Cummins Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Debt
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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 and notes receivable, gross = 100 × Allowance for doubtful account ÷ Accounts and notes receivable, gross
= 100 × ÷ =
| Financial ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of accounts and notes receivable, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | Cummins Inc. allowance as a percentage of accounts and notes receivable, gross increased from 2021 to 2022 but then slightly decreased from 2022 to 2023. |