Title: How the Confidence Interval Affects Business | Small Business - Chron.com
Headings: How the Confidence Interval Affects Business
How the Confidence Interval Affects Business
Confidence Intervals
Market Research
Risk Management
Budget Forecasting

Content: The confidence interval in this example is 95 percent, and the likelihood that the actual amount of plastic used is outside the estimated range is 5 percent. Market Research
One effect of confidence intervals in businesses is in determining the reliability of market research. Marketing is an important function for most firms, particularly when estimating their level of future sales. A company will want to have an idea of how many products it will sell in a given financial period, but cannot know the true number with certainty until after the end of the period. By collecting data from customers, past sales numbers and other sources, a company can statistically estimate the value of future sales. By using a confidence interval, the company can determine the range its sales are likely to fall. Risk Management
Because it is impossible to predict a future event with 100 percent accuracy, confidence intervals are used by businesses to manage risk. For example, if a company is 95 percent confident that sales in the next period will be between 5 million and 6 million units, there is still a 5 percent chance that they will be above or below that number. By understanding how likely a given risk is to occur, the business can manage the risks of a non-occurrence accordingly. Budget Forecasting
When a business forecasts a budget for a fiscal period, it will need to estimate both revenues and costs.