How does a business manager use probabilities for production planning?

Expert Solution

Probability theory is an important part of statistical theory which has a wide implication in the field of business and finance.

Probability theory is used by various fund managers in order to calculate long term and short term capital gains. It can be said that probability theory is used in in calculation of profit in respect with the required margin.

probability theory helps in measuring the risk exposures of different projects which are to be undertaken by the firm and since business cannot be operated without risk as there is some sort of market risk as well as project specific risk, that are specified in relation with business, the probability theory application is needed. So it can be said that it is used in risk evaluation of different projects.

Probability analysis is used in different types of calculation with regards to sales forecasting under different economic situations and it helps in proactive management of sales. Probability analysis has an application in scenario analysis as well, which is based upon different scenarios to calculate a given result.

So it can be said that the use of probability analysis is optimum in regards to decision making and various other aspects of business.

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