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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- Income Statement
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- Cash Flow Statement
- Common-Size Income Statement
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
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- Net Profit Margin since 2015
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).
1 2023 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
The financial data indicates fluctuations in accounts receivable, gross and the related allowance for doubtful accounts over the six-year period, highlighting variability in credit risk and collection efficiency.
- Accounts Receivable, Gross
- The gross accounts receivable exhibit a general upward trend from 2018 to 2022, increasing from 3,302 million US dollars in 2018 to a peak of 4,126 million in 2022. However, in 2023, there is a noticeable decline to 3,518 million, indicating a potential tightening of credit policies or improved collection efforts during the most recent period.
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts fluctuates rather than following a clear directional trend. Starting at 39 million US dollars in 2018, it decreases to 31 million in 2019, rises sharply to 46 million in 2020, and then declines significantly to 23 million in 2021. The allowance edges slightly upward in 2022 to 25 million and substantially increases again to 37 million in 2023. This pattern may reflect varying assessments of credit risk or changes in expected credit losses.
- Allowance as a Percentage of Accounts Receivable, Gross
- When analyzing the allowance relative to gross accounts receivable, the percentage starts at 1.18% in 2018 and decreases to 1.04% in 2019. It then rises to 1.34% in 2020, followed by a sharp reduction to 0.57% in 2021. The percentage remains low at 0.61% in 2022 before increasing again to 1.05% in 2023. This variability suggests changing expectations regarding the collectability of receivables and potential shifts in credit risk management or economic conditions impacting customer payment behavior.
Allowance for Credit Losses
Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).
1 2023 Calculation
Allowance as a percentage of financing receivables, gross = 100 × Allowance for credit losses ÷ Financing receivables, gross
= 100 × ÷ =
- Allowance for Credit Losses
- The allowance for credit losses showed a consistent upward trend from 2018 through 2022, increasing from 120 million US dollars to a peak of 325 million US dollars. In 2023, there was a noticeable reduction in the allowance to 243 million US dollars, representing a decline after several years of growth.
- Financing Receivables, Gross
- Gross financing receivables increased steadily between 2018 and 2021, rising from 8,256 million US dollars to a peak of 9,198 million US dollars. Subsequent years saw some fluctuation, with a decline to 8,359 million US dollars in 2022, followed by a modest recovery to 8,814 million US dollars in 2023.
- Allowance as a Percentage of Financing Receivables, Gross
- This ratio demonstrated a general upward trajectory between 2018 and 2022, moving from 1.45% to a high of 3.89%. However, in 2023, the ratio decreased to 2.76%, mirroring the reduction in the absolute allowance and the partial rebound in gross financing receivables.