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    Question

    Which of the following scenarios would benefit most from using time series analysis with seasonal decomposition?

    A Predicting stock prices of a volatile technology company Correct Answer Incorrect Answer
    B Forecasting sales for a seasonal product like winter clothing Correct Answer Incorrect Answer
    C Estimating employee turnover for a year-long hiring project Correct Answer Incorrect Answer
    D Analyzing daily customer satisfaction ratings Correct Answer Incorrect Answer
    E Comparing historical rainfall totals in various regions Correct Answer Incorrect Answer

    Solution

    Seasonal decomposition is especially useful for forecasting data with clear, recurring patterns, like sales of seasonal products. Winter clothing, for example, sees regular demand increases each year around the same season, making it ideal for seasonal decomposition. By separating the seasonal component, analysts can examine the underlying trend and make more accurate forecasts that account for the cyclical nature of the data. This is essential for inventory planning, marketing strategies, and meeting demand effectively during peak periods. Option A (Predicting stock prices) is incorrect because stock prices lack regular seasonal patterns due to volatility. Option C (Employee turnover) is incorrect as turnover doesn’t typically follow strict seasonal patterns. Option D (Customer satisfaction) is incorrect because daily satisfaction ratings may not exhibit significant seasonality. Option E (Rainfall totals) is incorrect since rainfall patterns are often irregular and better suited to long-term trend analysis than seasonal decomposition.

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