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.
Paying user area
Try for free
Stryker Corp. pages available for free this week:
- Analysis of Liquidity Ratios
- Common Stock Valuation Ratios
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2005
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Debt
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Stryker Corp. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for Doubtful Accounts
- There is a consistent upward trend in the allowance for doubtful accounts from 2017 through 2021. The amount increased from 59 million US dollars in 2017 to 167 million US dollars in 2021, showing nearly a threefold increase over the five-year period. This indicates a rising estimation of potential credit losses.
- Accounts Receivable, Gross
- The gross accounts receivable also shows an overall increasing trend, with values rising from 2,257 million US dollars in 2017 to 3,189 million US dollars in 2021. There is a noticeable peak in 2019 at 2,981 million and a slight dip in 2020 to 2,832 million before increasing again in 2021.
- Allowance as a Percentage of Accounts Receivable, Gross
- This ratio has increased steadily, reflecting a growing proportion of the receivables being reserved for doubtful accounts. It started at 2.61% in 2017 and rose to 5.24% by 2021. The most significant jump occurred between 2019 and 2020, increasing from 2.95% to 4.63%, suggesting increasing caution or anticipated credit risk during that period.
- Overall Analysis
- The data indicates that while gross accounts receivable increased moderately, the allowance for doubtful accounts grew at a faster rate, resulting in a higher percentage reserved for potential losses. The sharp increase in the allowance percentage between 2019 and 2020 signals a possible change in the credit risk environment or a strategic change in estimation methods. This trend suggests heightened credit risk awareness and a more conservative approach to bad debt provisioning over the five-year period.