Monte Carlo simulation is a computational technique that models the probability of different outcomes by running thousands of simulations with random variable inputs. In Amazon FBA analysis, it models the range of possible financial outcomes by varying price, sales volume, ACOS, and costs simultaneously.
Traditional financial projections use single-point estimates that create false confidence. Monte Carlo simulation reveals the full probability distribution of outcomes, showing the likelihood of profitability and the downside risk — critical information for investment decisions.
RIDGE runs 10,000-iteration Monte Carlo simulations as a core analytical component, generating P10 (pessimistic), P50 (median), and P90 (optimistic) financial projections. This is a key differentiator from tools that only provide single-point estimates.
A Monte Carlo simulation for a resistance band product might show: P90 (optimistic): $11,200/month revenue, P50 (median): $5,100/month, P10 (pessimistic): -$900/month. This reveals a 67% probability of profitability and a 10% chance of net loss.
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