Markov analysis, Managerial Accounting

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Markov Analysis

It is a way of analyzing the current movement of some system in an effort to predict the future movement of the same system.

There are two elements that must be determined in the process of constructing a Markov model in the system. These elements are the possible states of the system and the probabilities of moving between states (also called transition probabilities). A system state is a status of the system at a particular point in time, such as whether or not a machine is operating, whether an account is paid or not paid etc.

Transition probabilities:

Represent the probability of the system moving from one state to another during a particular period. We can organize the transition probabilities in the form of a table or matrix.


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