The Markov model and establishing the status of receivables: The challenges of application, dilemmas and practical implementation in agricultural enterprise

Abstract

© 2017, Universidade Federal Rural de Pernambuco. All rights reserved. Financial analysis pays great attention to receivables and managing the recoverability of receivables, where an increasing role is played by the Markov model, whose application in the function managing recoverability of receivables is becoming increasingly obvious, contributing to the improvement of quality of these processes. The given model can be efficiently implemented and provides the best information regarding the short-term and long-term recoverability of receivables. The main purpose of emergence of this paper is to shed light on the increasingly significant role played by Markov models in the overall receivables management, as the dominant factor of success of the overall business policy of the enterprise. The turbulence and uncertainty of the environment demand that enterprises efficiently and rationally manage receivables, cash, liabilities and investments, which represent the decisive factor in achieving and maintaining the financial result, profitability and liquidity as the essential determinants of solvency as the long-term objective of operation of any successful enterprise. This is especially prominent due to their arrangement relationship in the function of survival and subsequent growth and development of enterprises. As an element of the balance sheet, receivables exist in different forms, representing the transitional financial form and an essential form of balance sheet and overall financial and business policy of an enterprise. The paper will illustrate the basic characteristic determinants of receivables, point to the specific features of the Markov model, and illustrate its implementation and existence through a specific practical example, pointing to the benefits of its incorporation in contemporary enterprises.