How do Bad Debts Affect the Profits of Bahrain Duty Free Essay

How do Bad Debts Affect the Profits of Bahrain Duty Free - Essay Example The company is one of the greatest retail companies situated in the airport of Bahrain and it is worth for every individual to come and spend some time in this award winning duty free outlet. The company has been acclaimed internationally among the airport retail industry backed with an array of awards for the purpose of executing outstanding performance within the retail duty free industry. The company being located centrally between gates 14 and 15 on the departure concourse of the airport the duty free shopping in Bahrain duty free provides an extravagant shopping experience to the customers with international brands, prestigious brands and world class retail section highly known for its diverse types of products and also deemed as one of the finest airport facilities shopping all over the globe (Shopping and Eating, Bahrain International Airport). But despite of this reputed stature the company faces huge losses and one of the major reasons can be attributed to the bad debts affe cting the profit margins of the Bahrain Duty Free Complex. I have concentrated on secondary resources for providing relevant answers to the question. However the resources on the bad debt affecting the profitability of the company is limited although I have made a rigorous search for answering the questions by taking proxies of bad debts as outstanding loans, non performing loans, losses, fall in accounts receivables and several other key words for relating the same and answering the question. Procedure I have decided to write the topic on the basis of different secondary sources which are given in the following tabular representation. Annual Report 2011, Bahrain Duty Free Annual Report 2010, Bahrain Duty Free Article- UAE’s non-performing loans to peak in 2012 Article- UAE’s non-performing loans to peak in 2012 Book- Internal Revenue Service Tax Information Publications, The Service, Volumes 1-2; Volume 20001 Loopholes in national legal system Now I will move into the discussion of the paper. A business bad debt is a form of loss which generates from the worthlessness of a debt primarily from two main areas. Firstly it comes from creation or acquiring within the trade or business or secondly is closely related with the trade or business when it becomes partly or totally worthless. The bad debt of a corporation is always business bad debts. A debt is related closely to the trade or business if the primary motive for the purpose of incurring debt is a business reason (Taxpayer Information Publications, 342). Bahrain Duty Free (Duty Free) played dominantly in the market within the time span of 1991 to around 2000. Then the company encountered a massive drop in the year 2001 with a drop of around 20.9% in the net earnings post 9/11 attacks. Sales declined with an increase in the operating expenses. The company encountered a massive decline of around 8.1% in the net profit in comparison with the previous years. The second half of the year has also no t been different for the Bahrain Duty Free. With the outbreak of 9/11 attacks the global aviation industry became crumbled and the Middle East have been no exception. With the declining number of passengers as well as jeopardized global economic conditions which has been exacerbated by the attacks of 9/11 pushed heavily on the line of growth of the company. There has also been a drop of 20.9% drop in the net earnin