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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- Analysis of Liquidity Ratios
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- Enterprise Value to EBITDA (EV/EBITDA)
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- Selected Financial Data since 2013
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- Total Asset Turnover since 2013
- Analysis of Revenues
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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 × ÷ =
The financial data reveals notable trends in the allowance for doubtful accounts and accounts receivable over the analyzed periods.
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts showed a decreasing trend from 2017 through 2019, dropping from 5,430 thousand US dollars to 2,401 thousand US dollars. However, a marked increase occurred in 2020, peaking at 16,946 thousand US dollars, followed by a slight decline to 15,278 thousand US dollars in 2021.
- Accounts Receivable, Gross
- Accounts receivable, gross demonstrated a consistent upward trend throughout the period, rising from 669,698 thousand US dollars in 2017 to 1,232,682 thousand US dollars in 2021. The most significant increases appear between 2019 and 2020, and from 2020 to 2021.
- Allowance as a Percentage of Accounts Receivable, Gross
- This ratio declined steadily from 0.81% in 2017 to 0.28% in 2019, indicating a reduction in the proportion of doubtful accounts relative to gross receivables. In 2020, a sharp reversal occurred with the allowance rising to 1.6%, followed by a reduction to 1.24% in 2021, though remaining higher than the figures prior to 2020.
Overall, the data suggests increasing accounts receivable balances accompanied by a fluctuating allowance for doubtful accounts. The sharp increase in the allowance both in absolute terms and as a percentage of gross receivables in 2020 may indicate heightened credit risk or reconsideration of collectability estimates during that period, possibly influenced by external economic conditions. The subsequent slight adjustment in 2021 suggests some stabilization but continued caution in credit risk assessment.