Inventory and Probability: Difference between pages

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1. Raw materials, components, work in progress (WIP) and finished goods held by a company or other entity under review.
The study of chance providing an objective measure of uncertainty.


2. ''Accounting''.
Value of raw materials, components, work in progress (WIP) and finished goods held by a reporting entity at a balance sheet date.


Also known as Stock.
Probabilities range between 1 (=100%) and 0 (=0%). 
 
A probability of 100% means that an event is considered certain to occur.
 
A probability of 0% means that an event is considered certain not to occur. 
 
 
For example, flipping an unbiased coin, the probability of getting a head is often modelled as 50%.
 
 
This simple model of a coin flip assumes that the only two possibilities are a head or a tail.  Applying such simple models to financial situations, and treating financial outcomes as simple coin flips, may lead to errors resulting from:
 
#The coin landing on its edge 'more often than it's supposed to'.
#The underlying assumption of an unbiased coin not being a valid one. This kind of assumption is usually much too simple.
 


== See also ==
== See also ==
* [[Foreign exchange trader]]
* [[Black swan]]
* [[Inventory management]]
* [[Conditional probability]]
* [[Stock]]
* [[Confidence interval]]
* [[Work in progress]]
* [[Frequency distribution]]
 
* [[Mutually exclusive]]
[[Category:Accounting_and_Reporting]]
* [[Poisson distribution]]
[[Category:Business_Valuation]]

Revision as of 15:19, 8 June 2016

The study of chance providing an objective measure of uncertainty.


Probabilities range between 1 (=100%) and 0 (=0%).

A probability of 100% means that an event is considered certain to occur.

A probability of 0% means that an event is considered certain not to occur.


For example, flipping an unbiased coin, the probability of getting a head is often modelled as 50%.


This simple model of a coin flip assumes that the only two possibilities are a head or a tail. Applying such simple models to financial situations, and treating financial outcomes as simple coin flips, may lead to errors resulting from:

  1. The coin landing on its edge 'more often than it's supposed to'.
  2. The underlying assumption of an unbiased coin not being a valid one. This kind of assumption is usually much too simple.


See also