Bad Debt Ratio Calculator

Formula

The formula to calculate the Bad Debt Ratio (BDR) is:

\[ BDR = \left( \frac{BDA}{TCS} \right) \times 100 \]

Where:

Bad Debt Ratio (BDR): A financial metric that indicates the percentage of credit sales that are expected to be uncollectible.
Significance: Helps businesses estimate the amount of sales that will not result in cash flow due to non-payment, impacting profitability and liquidity.

Let's say the bad debt amount (BDA) is $5,000 and the total credit sales (TCS) is $100,000. Using the formula:

\[ BDR = \left( \frac{5,000}{100,000} \right) \times 100 = 5 \]

So, the Bad Debt Ratio (BDR) is 5%.