Importance of Confidence Interval

Case Analysis – Time Payments
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November 18, 2019
Understanding the importance of statistics in business is crucial in order to help formulate sound business decisions. This importance becomes even more apparent these days as information becomes readily available and accessible, while the demands of the market also increases significantly. Accordingly, one of the statistical tools that can be used to achieve this goal is the confidence interval (CI). The confidence interval is commonly used in order to have a general and objective estimate of the true value of the results derived from the study population. It reduces the risks of an ‘unrepresentative’ population that could lead to false results CITATION Unind3 \l 1033 (University of Yale, n.d.). In line with the case at hand, the confidence interval would be set at 95%. This is in line with the acceptable interval used in the field of both statistics and business.
Accordingly, the CI stated above would be used to measure the efficiency of a new electronic billing incorporated into a Californian trucking company. By obtaining a sample of sixty-five (65) invoices as sample population from a total of 7,823, the company is hoping to understand how to increase the efficiency of the payments. To ensure that there is an increase in an overall efficiency (reduction in number of days), the author of this paper have also set the null hypothesis to 19.5 days, which is the time estimated for clearing payments. All in all, the author believes that the use of the new Electronic Time record would increase the efficiency of the company’s billing system.