Explore BrainMass

Using Markov Analysis

A study of accounts receivable at the A&W Department Store indicates that bills are either current, one month overdue, two months overdue, written off as bad debts, or paid in full. Of those that are current, 80% are paid that month, and the rest become one month overdue. Of the one month overdue bills, 90% are paid, and the rest become two months overdue. Those that are two months overdue will either be paid (85%) or be listed as bad debts. If the sales each month average $150,000, determine how much the company expects to receive of this amount. How much will become bad debts?

Solution Summary

The bad debts for the A&W Department Store is determined.