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: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Debt
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
1 2016 Calculation
Allowance as a percentage of receivables, gross = 100 × Allowances for doubtful accounts ÷ Receivables, gross
= 100 × ÷ =
- Allowances for Doubtful Accounts
- The allowances for doubtful accounts exhibited variability over the years, beginning at 124 million US dollars in 2011, dipping to 111 million in 2012, and then increasing modestly to 121 million in 2013. A decline was noted again in 2014 to 113 million, followed by a notable rise to 141 million in 2015 and a significant increase to 212 million in 2016. This suggests a generally upward trend in anticipated credit losses over the analyzed period, especially pronounced in the last two years.
- Receivables, Gross
- Gross receivables showed consistent growth throughout the period. Starting at 9311 million US dollars in 2011, the figure increased steadily each year, reaching 10088 million in 2012, 10096 million in 2013, with more substantial growth seen in 2014 at 14306 million. This upward trajectory continued into 2015 and 2016, with receivables peaking at 16055 million and 18192 million respectively. This indicates expansion in the company's credit sales or extended credit terms over time.
- Allowance as a Percentage of Gross Receivables
- The allowance as a percentage of gross receivables declined from 1.33% in 2011 to 1.1% in 2012, then slightly increased to 1.2% in 2013. A sharp decrease was recorded in 2014 to 0.79%, maintaining a low of 0.88% in 2015 before rising again to 1.17% in 2016. This pattern suggests that while the absolute allowance for doubtful accounts grew, relative to the size of gross receivables, the provision fluctuated, reaching a low in 2014 and 2015, which could reflect changing credit risk assessment or collection efficiencies during those years.