The difference between Stock and Flow
- The basics. The easiest way to think of the difference between flow and stock is to step out of the finance discussion...
- In personal finances. Every time we get a statement summing or subtracting amounts your account, this refers to flow.
- For companies. Legal entities also have to look at flow and stock of funds, so knowing which...
How to distinguish between stock and flow variables?
- Wealth is a stock, income is a flow.
- Kilowatt hours (e.g. ...
- The amount of gold in a reserve is a stock, the mining of it is a flow.
- The population of a country is a stock, birth rates, death rates and migration rates are flows.
- The inventory in a warehouse is a stock, orders taken from it or products added to it are flows.
- Well, you get the idea.
Is capital a stock or flow?
These differ in their units of measurement. Capital is a stock concept which yields a periodic income which is a flow concept. Stocks and flows have different units and are thus not commensurable – they cannot be meaningfully compared, equated, added, or subtracted.
What is stock and flow variables?
Flow variables refer to variables that are measured over a period or per unit of time. Stock variables, on the other hand, mean those variables that are measured at a point in time. The concepts of stock and flow are variables that have mutual dependence both to each other as well as to other variables.
What is stock and flow?
Thus, a stock refers to the value of an asset at a balance date (or point in time), while a flow refers to the total value of transactions (sales or purchases, incomes or expenditures) during an accounting period.
What is a stock or flow?
A stock is measured at one specific time, and represents a quantity existing at that point in time (say, December 31, 2004), which may have accumulated in the past. A flow variable is measured over an interval of time. Therefore, a flow would be measured per unit of time (say a year).
What is the difference between a flow variable and a stock variable?
The amount of water that has flown into the tub over a period of time is a flow variable. An easy way to distinguish between flow and stock variables is that a flow variable is measured over a period of time while stock variable is measured at a specific point of time.
What is the difference between a flow variable and a stock variable quizlet?
What is the difference between a flow variable and a stock variable? A flow variable is a variable that is measured over a specific period of time while a stock variable is a variable that is measured at a specific point in time.
What is stock and flow give two examples of each?
Definition. A stock variable is measured at a particular point of time. For example, bank balance as on October 01, 2010 is Rs 5000. A flow variable is measured over an interval of time. For example, interest earned on bank deposits for 1 year, i.e. from October 01, 2009 to September 30, 2010.
What do you mean by stock in economics?
Definition: A stock is a general term used to describe the ownership certificates of any company. A share, on the other hand, refers to the stock certificate of a particular company. Holding a particular company's share makes you a shareholder.
What is a stock concept?
What do we mean by Stock Concept? A stock is a quantity measured at a particular point in time. For example; on January 1, 2019, you have 2000 rupees in your bank account is a stock concept, Rs. 2000 note lying in the wallet of Rohini, a student is also an example of Stock Variable.
What is the difference between a stock and a flow quizlet?
What is the difference between a flow variable and a stock variable? A.A stock variable is a variable that is measured over a specific period of time while a flow variable is a variable that is independent of time.
What is the major difference between stock and flow statistics quizlet?
Stock statistics compare groups at one point in time. Flow statistics compare proportions taken at two points in time.
What is a stock variable?
stock variable (plural stock variables) (economics, accounting) A variable whose value depends on an instant rather than on a period of time.
What is stock and flow variables in economics?
Flow variables refer to variables that are measured over a period or per unit of time. Stock variables, on the other hand, mean those variables that are measured at a point in time. The concepts of stock and flow are variables that have mutual dependence both to each other as well as to other variables.
Is saving a stock or flow?
Saving is measured in dollars per unit time and is a flow variable. Because saving takes the form of an accumulation of assets or a reduction in liabilities (for example, if saving is used to pay off debts), it adds to wealth just as water flowing into a bathtub adds to the stock of water.
What is the difference between a stock and a flow?
Thus, a stock refers to the value of an asset at a balance date (or point in time), while a flow refers to the total value of transactions (sales or purchases, incomes or expenditures) during an accounting period.
What are stock and flow?
Stocks and flows also have natural meanings in many contexts outside of economics, business and related fields. The concepts apply to many conserved quantities such as energy, and to materials such as in stoichiometry, water reservoir management, and greenhouse gases and other durable pollutants that accumulate in the environment or in organisms. Climate change mitigation, for example, is a fairly straightforward stock and flow problem with the primary goal of reducing the stock (the concentration of durable greenhouse gases in the atmosphere) by manipulating the flows (reducing inflows such as greenhouse gas emissions into the atmosphere, and increasing outflows such as carbon dioxide removal ). In living systems, such as the human body, energy homeostasis describes the linear relationship between flows (the food we eat and the energy we expend along with the wastes we excrete) and the stock (manifesting as our gain or loss of body weight over time). In Earth system science, many stock and flow problems arise, such as in the carbon cycle, the nitrogen cycle, the water cycle, and Earth's energy budget. Thus stocks and flows are the basic building blocks of system dynamics models. Jay Forrester originally referred to them as "levels" rather than stocks, together with "rates" or "rates of flow".
What is a stock level variable?
A stock (or "level variable") in this broader sense is some entity that is accumulated over time by inflows and/or depleted by outflows. Stocks can only be changed via flows. Mathematically a stock can be seen as an accumulation or integration of flows over time – with outflows subtracting from the stock.
How many machines did the stock of physical capital have in 2010?
For example, if a country's stock of physical capital on January 1, 2010 is 20 machines and on January 1, 2011 is 23 machines, then the flow of net investment during 2010 was 3 machines per year. If it then has 27 machines on January 1, 2012, the flow of net investment during 2010 and 2011 averaged. machines per year.
Is nominal gross domestic product a flow variable?
For example, U.S. nominal gross domestic product refers to a total number of dollars spent over a time period, such as a year. Therefore, it is a flow variable, and has units of dollars/year.
Can you compare stocks and flows?
Comparing stocks and flows. Further information: Dimensional analysis § Commensurability. Stocks and flows have different units and are thus not commensurable – they cannot be meaningfully compared, equated, added, or subtracted. However, one may meaningfully take ratios of stocks and flows, or multiply or divide them.
What is the difference between a stock and a flow?
The distinction between them is that a stock is a quantity measurable at a specialised point in time, whereas a flow is a quantity that can be measured only in terms of a specialised period of time.
Why does the stock of capital increase?
The stock of capital can increase only as a result of an excess of the flow of investment or of new capital goods produced over the flow of capital goods consumed. ADVERTISEMENTS: However, the flow of investment itself depends, among other things, on the size of the capital stock.
Can a stock change as a result of a flow?
Although a stock can change only as a result of flows, the magnitudes of the flows themselves may be determined in part by changes in the stock. The best example of this is the relationship between the stock of capital and the flow of investment. The stock of capital can increase only as a result of an excess of the flow of investment or ...
Can flows be influenced by stocks?
Therefore, although flows may be influenced by changes in stocks, they will not be so influenced by changes in stocks in the short run. For example, if the net effect of the flows of gross investment and capital consumption is an increase in the stock of capital between January 1 and December 31 amounting to a fraction of 1 percent ...
Is money a stock or a flow?
Money is a stock, but the spending of money is a flow. To say simply that the stock of money is $375 billion has no meaning until we specify the point in time— March 31, 1980—at which this was the stock.
Do macroeconomic variables have a direct counterpart?
Some macroeconomic variables that have flow magnitudes also have direct counterpart stock variables. However, others—such as imports and exports, wages and salaries, tax payments, social security benefits, and dividends—are only flows, none has a direct stock counterpart (it is impossible to conceive of a “stock of imports” or a “stock ...
What is stock in economics?
A stock is a quantity which is measurable at a particular point of time, e.g., 4 p.m., 1st January, Monday, 2010, etc. Capital is a stock variable. On a particular date (say, 1st April, 2011), a country owns and commands stock of machines, buildings, accessories, raw materials, etc. It is stock of capital.
What are some examples of flows?
Other examples of flows are: expenditure, savings, depreciation, interest, exports, imports, change in inventories ( not mere inventories), change in money supply, lending, borrowing, rent, profit, etc. because magnitude (size) of all these are measured over a period of time.
What is flow in advertising?
ADVERTISEMENTS: A flow is a quantity which is measured with reference to a period of time. Thus, flows are defined with reference to a specific period (length of time), e.g., hours, days, weeks, months or years. It has time dimension. National income is a flow.
Is a stock a time dimension?
It is stock of capital. Like a balance-sheet, a stock has a reference to a particular date on which it shows stock position. Clearly, a stock has no time dimension (length of time) as against a flow which has time dimension.
Is wealth a stock or a flow?
A flow shows change during a period of time whereas a stock indicates the quantity of a variable at a point of time. Thus, wealth is a stock since it can be measured at a point of time, but income is a flow because it can be measured over a period of time.
How are stock and flow gases different?
Stock and flow gases have drastically different lifecycles, which is what ultimately makes them so different. Fossil fuels companies emitting carbon dioxide (CO2), a stock gas, are dumping this GHG into the atmosphere at a much faster rate than it can be naturally absorbed by oceans and plants. This carbon dioxide will not only remain in ...
What is the most abundant stock gas in the atmosphere?
Carbon dioxide (CO2) emitted from the burning of fossil fuels is the most abundant stock gas in our atmosphere and significantly contributes to climate change. So, every time we drive our gas powered cars to work, to school, to the grocery store, and beyond, the CO2 emitted from the tailpipe builds upon CO2 already in the atmosphere ...
How are stock and flow related?
Relation between stock and flow concept. They both are inter-related to each other. The stock has an influence overflow variable, that is, it can change the flow variable. For example, an increase in bank deposit (stock) can cause an increase in the income of a consumer in the form of interest.
What is stock concept?
What do we mean by Stock Concept? A stock is a quantity measured at a particular point in time. For example; on January 1, 2019, you have 2000 rupees in your bank account is a stock concept, Rs. 2000 note lying in the wallet of Rohini, a student is also an example of Stock Variable. All such values are stock values as they are measured ...
The Basics
in Personal Finances
- Every time we get a statement summing or subtracting amounts your account, this refers to flow. From salary plus other income you might have, to expenses and investments reducing the amount of funds on your account, these transactions represent movement and are similar to the water being poured into (or taken out of) the account. You may note that the flow will generally corres…
For Companies
- Legal entities also have to look at flow and stock of funds, so knowing which refer to stock and which to flow is key to understand the financial situation you are looking at. Take a company’s financial statements and the different documents you find in them. One can easily distinguish flow from stock, since they displayed separately. Profits and Losses (often called P&L) is a contr…
Domestic and National Accounts
- When it comes to news regarding national and domestic accounts, there is a myriad of numbers being published, and while basics of a country’s domestic accounts are similar to a company or an individual, the dimensions are large enough to confuse a first-time reader. The widely known Gross Domestic Product – or GDP – corresponds to how much an economy has generated over …
Conclusions
- To sum up, if you want to know your numbers, whether you are looking at your personal finances, a company or a country, please make sure to consider if they are flow or stock types. Bear in mind that someone whose monthly budget indicates a large flow, but holding little stock, is in a very different position of someone who has large stock, but with little ongoing budgets. Consider tho…
Overview
Economics, business, accounting, and related fields often distinguish between quantities that are stocks and those that are flows. These differ in their units of measurement. A stock is measured at one specific time, and represents a quantity existing at that point in time (say, December 31, 2004), which may have accumulated in the past. A flow variable is measured over an interval of time. T…
Stocks and flows in accounting
Thus, a stock refers to the value of an asset at a balance date (or point in time), while a flow refers to the total value of transactions (sales or purchases, incomes or expenditures) during an accounting period. If the flow value of an economic activity is divided by the average stock value during an accounting period, we obtain a measure of the number of turnovers (or rotations) of a stock in that accounting period. Some accounting entries are normally always represented as a f…
Comparing stocks and flows
Stocks and flows have different units and are thus not commensurable – they cannot be meaningfully compared, equated, added, or subtracted. However, one may meaningfully take ratios of stocks and flows, or multiply or divide them. This is a point of some confusion for some economics students, as some confuse taking ratios (valid) with comparing (invalid).
The ratio of a stock over a flow has units of (units)/(units/time) = time. For example, the debt to …
More general uses
Stocks and flows also have natural meanings in many contexts outside of economics, business and related fields. The concepts apply to many conserved quantities such as energy, and to materials such as in stoichiometry, water reservoir management, and greenhouse gases and other durable pollutants that accumulate in the environment or in organisms. Climate change mitigation, for example, is a fairly straightforward stock and flow problem with the primary goal of reducing …
History
The distinction between a stock and a flow variable is elementary, and dates back centuries in accounting practice (distinction between an asset and income, for instance). In economics, the distinction was formalized and terms were set in (Fisher 1896), in which Irving Fisher formalized capital (as a stock).
Polish economist Michał Kalecki emphasized the centrality of the distinction of stocks and flows…
See also
• Flow (disambiguation)
• Intensive and extensive properties
• Stock (disambiguation)
• Stock-Flow consistent model