This study develops a Markov chain model evaluating present realizable value of credit accounts, while traditional models have focused only on the total amount to be collected from the credit accounts. The model estimates the timing of payments and ca...
This study develops a Markov chain model evaluating present realizable value of credit accounts, while traditional models have focused only on the total amount to be collected from the credit accounts. The model estimates the timing of payments and calculates the present realizable value of credit account, an estimate of the price of the credit account. The model is very useful in managing working capital and establishing credit and collection policy of the firm. The model can be also applied in manpower planning and revenue recognition in long-term aging industry.