Discuss How Probability Distributions Are Used in Estimating Future Losses

question 16

Essay

Discuss how probability distributions are used in estimating future losses.

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Definitions:

Investment Turnover

A ratio measuring how efficiently a company generates sales from its inventory investments.

Profit Margin

A financial metric expressing the percentage of revenue that remains as profit after all operating expenses are deducted.

Return on Investment

A financial metric used to measure the efficiency of an investment, calculated by dividing the profit gained from the investment by its cost.

Residual Income

The amount of income that an individual has after all personal debts and expenses have been paid, often used in corporate finance to measure the excess of actual profit over the expected return on investment.