Accounts receivables

Accounts receivables, Managerial discretion

A model is constructed for three related time series: an inflow, a stock, and an outflow. The inflow and outflow time series are related via a truly stochastic distributed lag and the three time series are viewed as cumulations of a random number of units of randomly determined size. Among the interesting results are the serial correlations of the stock and outflow time series viewed singly and the cross and cross serial correlations between outflow in t and stock at t -1, outflow in t, and inflow in t - i, as well as between stock in t and inflow in t - i. These relations and others make it possible to evaluate the comparative advantage of lead series in forecasting lag series and as such may be of methodological value for the evaluation of stabilization policies. The model may be viewed as a description of several inflow-stock-outflow phenomena: trade credit and consumer credit processes, demand deposits of commercial banks, population and labor force, the formation and decay of aggregates of capital projects, and some aspects of the income-expenditure process. THIS PAPER develops a model of a stochastic process that gives rise to three time series: an inflow, a stock, and an outflow. These series come into being as sums of subcomponents of differing magnitudes, where the number of subcomponents in the sums differs both between series cross sectionally, and within series over time. The inflow time series is simply the sum of units of unequal size which come into being in period t. The stock time series is the sum of units of unequal size which have come into being in periods preceding t and have not yet vanished in t. The outflow series is the sum of the unequal magnitudes of all those units which came into being in periods preceding t and which cease to exist in t. Additionally, the period between the time a unit comes into being and the time it vanishes is a random variable. Time series that are formed in such a fashion are encountered in both microeconomic and macroeconomic phenomena. Credit sales, receivables and collections of a firm, as well as new loans made, loans outstanding, and loans repaid of a commercial bank, provide microeconomic examples. Income, cash balances 1