BUSINESS STATISTICS

Submitted To: Sir Tauseef

Assignment
Submitted #By:
2 Shahzeb Ahmed
Class/Section: BBA 3-A
Roll no. : 180338
 Business statistics | Assignment # 2

Define advantages and disadvantages along with the use of

different measures of data i.e. mean, arithmetic mean, harmonic
mean, geometric mean, median and mode.
1. Mean:
∑ of all values
No . of values
Mean is typically the best measure of central tendency because it takes all values into
account.
 Advantages:
1. It can be easily calculated.
2. Its calculation is based on all the observations.
3. It is rigidly defined by the mathematical formula.
4. It is the best measure to compare two or more series of data.
5. It does not depend upon any position.
 Disadvantages:
1. It may not be represented in actual data so it is theoretical.
2. It is affected by extreme values.
3. It cannot be calculated if all observations are not known.
4. It cannot be used for qualitative data i.e. love, beauty, honesty, etc.
 Uses:
1. It is extremely used in medical statistics.
2. Estimates are always obtained by mean.
3. Used to get the overall picture of the data set.
2. Arithmetic mean:
It is defined as the sum over all of the values of a variable, divided by the sample size.
∑X
A.M = n
 Arithmetic mean for grouped data:
k

A.M = ∑
f i xi
i=1
n
 Weighted arithmetic mean:
k

∑ wi xi
A.M (weighted) = i=1
k

∑ wi
i=1

 Advantages:
1. Simplicity.
2. Based on all items.
3. Basis of comparison.
4. Accuracy test.
5. Certainty.

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 Business statistics | Assignment # 2

 Disadvantages:
1. Effect of extreme value.
2. Mean value may not figure in the series at all.
3. Misleading conclusions.
 Uses:
1) When you work with independent data.
2) When all items in the data set are equally important.
3) When you need a quick, easy, and rough information about the overall
level. Arithmetic average is the easiest one to calculate.
3. Harmonic mean:
The harmonic mean, H, is equal to the sample size divided by the sum of the
reciprocal of a set of values:
n
H= n

∑ ( 1x )
i=1 i

 Advantages:
1. It is rigidly defined.
2. It is capable of further algebraic treatment.
3. It can be calculated even when a series contains any negative value.
4. It gives a curve straighter than that of the arithmetic and geometric
mean.

 Disadvantages:
1. It is not easy to understand to someone who has little knowledge of
statistics.
2. Its calculation is complex as it involves finding reciprocal of the
numbers.
3. It is greatly affected by the values of the extreme items.
4. It cannot be calculated if any of the item is zero.
 Uses:
1) Harmonic means are often used in averaging things like rates, e.g. the
average travel speed given a duration of several trips.
4. Geometric mean:
The geometric mean is defined as the n-th root of the product of a set of n values.
1
G = Antilog ( k
1
( ∑ f log x ¿ )¿
n i=1 i
 Advantages:
1. It is rigidly defined.
2. It is based upon all the observations.

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 Business statistics | Assignment # 2

3. It is suitable for further mathematical treatment.

4. It is not affected much by fluctuations in samplings.
5. It gives comparatively more weight to small items.
 Disadvantages:
1. Because of its abstract mathematical character, geometric mean is not
easy to understand and to calculate for non-mathematics person.
2. If anyone of the observations is negative, geometric mean becomes
imaginary regardless of the magnitude of the other items.
 Uses:
1) Applications of the geometric mean are most common in business and
finance, where it is commonly used when dealing with percentages to
calculate growth rates and returns on portfolio of securities.
2) The geometric mean has been used in film and video to choose aspect
ratios (the proportion of the width to the height of a screen or image).
It’s used to find a compromise between two aspect ratios, distorting or
cropping both ratios equally.
5. Median:
The "median" is the "middle" value in the list of numbers. To find the
median, the numbers have to be listed in numerical order from smallest to
largest, so it might require to rewrite the list before we can find the
median.
 Advantages:
1) Median lies at the middle part of the series and hence it is not affected
by the extreme values.
2) It is a special average used in qualitative phenomena like intelligence
or beauty which are not quantified but ranks are given. Thus we can
locate the person whose intelligence or beauty is the average.
3) It is especially useful in open-ended distributions since the position
rather than the value of item that matters in median.
 Disadvantages:
1) In simple series, the item values have to be arranged. If the series
contains large number of items, then the process becomes difficult.
2) It is a less representative average because it does not depend on all the
items in the series.
3) It is affected more by sampling fluctuations than the mean as it is
concerned with on1y one item i.e. the middle item.
 Uses:
1) The median is used where strong outliers may skew the representation
of the group, such as with incomes. For example, if you have one

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 Business statistics | Assignment # 2

person who earns $1 billion a year and nine other people who earn
under $100,000 a year, the mean income for people in the group would
be around $100 million, a gross distortion. The median income would
be under $100,000, more closely representing the situation of the
majority of the group.
6. Mode:
The mode is a statistical term that refers to the most frequently occurring number
found in a set of numbers. The mode is found by collecting and organizing data in
order to count the frequency of each result. The result with the highest count of
occurrences is the mode of the set.
 Advantages:
1) Mode is not at all affected by extreme values.
2) It can be useful for qualitative data.
3) Mode is readily comprehensible and easy to calculate. Like median,
mode can be located in some cases merely by inspection.
 Disadvantages:
1) It is not based upon all the observations.
2) As compared with mean, mode is affected to a greater extent, by
fluctuations of sampling.
3) Sometimes the data has one or more than one mode and sometimes the
data has no mode at all.
 Uses:
1) The mode is not often used in describing data, but it can be useful in
certain circumstances. Here's an example of determining a mode: If, in
a room of 50 students, 30 are 7 years old and the rest are 6 or 8 years
old, the mode of the ages is 7.

References:
1) https://www.macroption.com/arithmetic-average-when-use/
2) https://corporatefinanceinstitute.com/resources/knowledge/other/harmonic-mean/
3) https://www.statisticshowto.datasciencecentral.com/geometric-mean-2/
4) https://sciencing.com/uses-mean-median-mode-6323388.html

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