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http://dx.doi.org/10.7838/jsebs.2019.24.1.091

Analysis of Accounts Receivable Aging Using Variable Order Markov Model  

Kang, Yuncheol (Department of Industrial Engineering, College of Engineering, Hongik University)
Kang, Minji (Department of Industrial Engineering, College of Engineering, Hongik University)
Chung, Kwanghun (College of Business Administration, Hongik University)
Publication Information
The Journal of Society for e-Business Studies / v.24, no.1, 2019 , pp. 91-103 More about this Journal
Abstract
An accurate prediction on near-future cash flows plays an important role for a company to attenuate the shortage risk of cash flow by preparing a plan for future investment in advance. Unfortunately, there exists a high level of uncertainty in the types of transactions that occur in the form of receivables in inter-company transactions, unlike other types of transactions, thereby making the prediction of cash flows difficult. In this study, we analyze the trend of cash flow related to account receivables that may arise between firms, by using a stochastic approach. In particular, we utilize Variable Order Markov (VOM) model to predict how future cash flows will change based on cash flow history. As a result of this study, we show that the average accuracy of the VOM model increases about 12.5% or more compared with that of other existing techniques.
Keywords
Cash Flow forecasting; Account Receivable Aging; Variable Order Markov Model;
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Times Cited By KSCI : 1  (Citation Analysis)
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