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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- Balance Sheet: Assets
- Cash Flow Statement
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Operating Profit Margin since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Analysis of Revenues
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Allowance for Doubtful Accounts Receivable
Based on: 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), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Allowance as a percentage of receivables, gross = 100 × Allowance for doubtful accounts ÷ Receivables, gross
= 100 × ÷ =
- Allowance for doubtful accounts
- The allowance for doubtful accounts exhibited a fluctuating trend over the five-year period. It decreased slightly from 29 million USD in 2018 to 28 million USD in 2019, then increased to 34 million USD in 2020. A more significant rise occurred in 2021, reaching 44 million USD, followed by a decline to 38 million USD in 2022. This indicates a cautious approach towards potential credit losses, especially during 2020 and 2021.
- Receivables, gross
- Gross receivables showed considerable volatility. Starting at 1464 million USD in 2018, the figure sharply declined to 984 million USD in 2019 and further dropped slightly to 948 million USD in 2020. However, there was a substantial increase in 2021 to 2012 million USD, more than doubling the previous year's amount, before decreasing again to 1523 million USD in 2022. This pattern suggests variability in sales or credit extension policies, with notable expansion in receivables during 2021.
- Allowance as a percentage of receivables, gross
- The allowance as a percentage of gross receivables generally trended upward from 2018 through 2020, increasing from 1.98% to 3.59%. It then declined to 2.19% in 2021, followed by a slight increase to 2.5% in 2022. This fluctuation may reflect changes in credit risk assessment and collection experience. The peak in 2020 aligns with heightened allowances during a period of reduced receivables, possibly indicative of increased expected credit losses during that year.