Question

In: Finance

How can probability distribution be used in business management of firms?

How can probability distribution be used in business management of firms?

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Expert Solution

Probability distribution can be used to manage the firm in different context. The probability distribution helps to identify or predict the future. Here it will say the probability to happening events in the firms. practical use for probability distributions and scenario analysis in business is to predict future levels of sales. So inorder to identify how much sales may happen in the future we can use probability. As per the prevvious data we can analyse the future of the firm. For new business firms this will be very helpful. Apart from that this will also helps to risk evaluation. So to make certain percentage of revuenue in certain time period what will be our risk.This can be measured using prbability sampling.For making some hypothetical tests with in the firm we can use this method and it also encourage the simulation studies based on numbers. There are a number of probability functions used in applications for managing firms and this will enhance the smooth running of the business.

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