Formula to calculate bad debts ratio:
Bad Debts Ratio = bad debts / accounts receivable.
Bad debts ratio definition and explanation:
The bad debts ratio is an overall measure of the possibility of the business incurring bad debts.
The higher the bad debts ratio, the greater the cost of extending credit.
The bad debts ratio is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.