This prediction is, of course, dependent on the assumption that sales follow a random walk. For example, if sales followed a simple autoregressive process, with the variable expense assumption earnings would follow a similar process. The preceding analysis shows that a very simple model of the firm that assumes sales follow a random walk and allows only for accounts receivable, accounts payable and inventory accruals can generate the basic time series properties observed for operating cash flows, earnings, and accruals. As mentioned in the introduction, one reason for accountants' interest in the properties of accruals, earnings, and cash flows is to.
