STATISTICS FOR BUSINESS

• Origin and Development

• by-product of the administrative activity of the State.

• The word statistics seems to have been derived from the

Latin word “Status” or the Italian word “statista” or the
German word “statistik” or the French word “statistique'
each of which means a “political state”. It was first used
by Gottfried Achenwall (1719–1772), a professor at
Marlborough and Göttingen.

• Sir Ronald A Fisher (1890 - 1962), known as the “Father of

Statistics”
• The word Statistics has been used to convey
different meanings in singular and plural sense.
When used as plural
Statistics means numerical set of data

Singular sense
It means the science of statistical methods
embodying the theory and techniques used for
collecting,analysing and drawing inferences from
the numerical data.
 Definition of Statistics-
Statistics as numerical data
• "Statistics are the classified facts representing the conditions of
the people in a State ... specially those facts which can be stated in
number or in tables of numbers or in any tabular or classified
arrangement."- Webster

• “Statistics are numerical statements of facts in any department of

enquiry placed in relation to each other “-Bowley

• “By Statistics we mean quantitative data affected to a marked

extent by multiplicity of causes”-Yule and kendall
• “Statistics may be defined as the aggregate of facts affected to a
marked extent by multiplicity of causes ,numerically expressed
,enumerated or estimated according to a reasonable standard of
accuracy ,collected in a systematic manner ,for a
predetermined purpose and placed in relation to each other' -
Prof.Horace Secrist

• The best definition-seems to be one given by' Croxton and

Cowden-
" The science which deals with the
collection, analysis and interpretation of numerical data."
• Definition

Statistics as statistical methods

1 Statistics may be called the science of counting-

Bowley A.L

2.Statistics may rightly be called the sceince of

averages-Bowley A.L

3.Statistics is the science of the measurement of

social organism,regarded as a whole in all its
manifestations-Bowley A.L
• 4.Statistics is the science of estimates and probabilities-Boddington

• 5.The science of Statistics is the method of judging collective,natural

or social phenomenon from the results obtained from the analysis
or enumeration or collection of estimates-King

• 6.Statistics is the science which deals with classification and

tabulation of numerical facts as the basis for explanation
,description and comparison of phenomenon-Lovin
7.statistics is the science which deals with the
methods of collecting,classifying
,presenting,comparing and interpreting numerical
data collected to throw some light on any sphere of
enquiry-Sellingman

8.Statistics may be defined as the science of

collection,presentation,analysis and interpretation of
numerical data-Croxton and Cowden
9.Statistics may be regarded as a body of methods for
making wise decisions in the face of uncertainty-
Wallis and Roberts

10.Statistics is a method of decision making in the

face of uncertainty on the basis of numerical data and
calculated risks-Prof Ya-Lun-Chou

11 The science and art of handling aggregate of facts -

observing ,enumeration,recording,classiying and
otherwise systemstically treating them-Harlow
Business Statistics helps a business to:

• Deal with uncertainties by forecasting

seasonal, cyclic and general economic
fluctuations.
• Decision making by providing accurate
estimates about costs, demand, prices,
sales etc.
• in business planning on the basis of sound
predictions and assumptions.
What Are Business Statistics?

Statistical research in business enables managers to

analyse past performance, predict
future business practices and lead organizations
effectively. Statistics can describe markets, inform
advertising, set prices and respond to changes in
consumer demand.
 Importance and Scope of Statistics

Statistics a for Planning.

Statistics is imdispensable to planning. In the
moden age which is termed as 'the age of planning',
almost allover the world,
governments, particularly of the budding economies, are
resorting to planning for
the economic development. In order that planning is
successful, it must be based
soundly on the correct analysis of complex statistical data.
• Statistics and Economics.
Statistical data and technique of statistical analysis
have proved immensely useful in solving a variety of economic
problems, such as
• wages, prices, analysis of time series and demand analysis.
It has also facilitated
• the development of economic theory.

Wide applications of mathematics and

statistics in the study of economics have led to the development of
new disciplines
called “Economic Statistics and Econometrics”
• Statistics and Business.
Statistics is an indispensable tool of production control also.
Business executives are relying more and more on statistical
techniques for studying the needs and the desires of the
consumers and for many other purposes.

The success of a businessman more or less depends upon

the accuracy and precision of his statistical forecasting.
Wrong expectations, which may be the result ,of faulty and
inaccurate analysis of various causes affecting a particular
phenomenon, might lead to his, disaster.
Statistics and Industry.

Statistics is very widely used in 'Quality Control' .

In production engineering, to find whether the product is
meeting specifications or not, statistical tools, inspection plans,
control charts, etc., are of extreme importance. In inspection we
have to resort to some kind of sampling - a very important aspect
of Statistics.
• Statistics and Mathematics.
Statistics and mathematics arc very intimately
related. Recent advancements in statistical
techniques arc the outcome of
• applications of advanced mathematics. Main
contributors to statistics, namely,-
• Bemouli, Pascal, Laplace, De-Moivre, Gauss, R. A.
Fisher, to mention only a few,
were primarily talented and skilled mathematicians
• Statistics and Biology, Astronomy and Medical Science.

The association between statistical methods and biological theories was first studied by
Francis Galton in his work in 'Regressior:t'. According to Prof. Karl Pearson, the whole
'theory of heredity' rests on statistical basis. He says, " The whole problem of
evolution is a problem of vital statistics, a problerrz of longevity, of fertility, of
health, of disease and it is impossible for the Registrar General to discuss the
national mortality without an enumeration of the popUlation, a classification of
deaths and knowledge of statistical theory."
In astronomy, the theory of Gaussian 'Normal Law of Errors' for the study.
of the movement of stars and planets is developed by using the 'Principle of Least
Squares'.
In medical science also, the statistical tools for the collection, presen,tation
and analysis of observed facts relating to the causes and incidence bf diseases and
the results obtained from the use of various drugs and medicines, are of great
importance. Moreover, thtf efficacy of a manufacutured drug or injection or
medicine is tested by l!sing the 'tests of sigJ'lificance' - (t-test).
Statistics and Psychology and Education.

In education and psychology, too,

Statistics has found wide applications,
e.g., to determine the reliability and validity
of a test, 'Factor Analysis', etc., so much so that a new
subject called 'Psychometry' has come into existence.

Statistics and War.

In war, the theory of 'Decision Functions' can beof great

assistance to military and technical personnel to plan
'maximum destruction with
minimum effort'
• Limitations of Statistics
• (i) Statistics is not suited·to the study of
qualitative phenomenon.
Statistics,
• being a science dealing with a set of numerical
data, is applicable to the study of
• only those subjects of enquiry which are
capable of quantitative measurement
• (ii) Statistics does not study individuals.
Statistics deals with an aggregate of
• objects and does not give any specific
recognition to the individual items of a series.
• Individual items, taken separately, do not
constitute statistical data and are meaningless
for any statistical enquiry.
iii) Statistical laws are not expilct.
(

Unlike the laws of physical and natural

sciences, statistica1laws are only approximations
and not exact. On the basis of
statistical analysis we can tell only in terms of
probability and chance and not in
terms of certainty
(iv) Statistics is liable to be misused.

Perhaps the most important limitation

of Statistics is that it must be used by experts. As the saying
goes, " Statistical methods are the most dangerous tools in
the hands of the inexperts. Statistics is
one of those sciences whose adepts must exercise the self-
restraint of an artist."
The use of statistical tools by inexperienced persons might
lead to very fallacious conclusions.
1·5. Distrust of Statistics.
WlYoften hear the following interesting comments
on Statistics:
(i) 'An ounce of truth will produce tons of Statistics',
(ii) 'Statistics can prove anything',
(iii) 'Figures do not lie. Liars figure',
(iv) 'If figures say so it can't be otherwise',
(v) 'There are three type of lies - lies, demand lies, and Statistics - wicked in
the order ofotheirnaming, and so on.

Some of the reasons for the existence of such divergent views regarding the
nature and function of Statistics are as follows:
(i) Figures are innocent, easily believable and more convincing. The facts
supported by figures are psychologically more appealing.
(ii) Figures put forward for arguments may be inaccurate or incomplete and
thus might lead to wrong inferences.
(iii) Figures, though accurate,might be moulded and manipulated by selfish
persons to conceal the truth and present a distorted picture of facts to the public to
meet their selfish motives.
• We discuss below a few interesting examples of misrepresentation of statistical
• data.
• (i) A statistical report: "The number of accidents taking place in the middle
of the road is much less than the number of accidents taking place on 'its side. Hence
it is safer to walk in the middle of the road." This conclusion is obviously wrong
since we are not given the proportion of the number of accidents to the number of
persons walking in the two cases.

• 1·8 Fundamentals of MathematiCal StatisticS

• (ii) "The number ohtudents laking up Mathematics Honours in a University
has increased 5 times during the last 3 years. Thus, Mathematics ·is gaining
'popularity among the students of the university." Again, the conclusion is faulty
since we are not given any such details about the other subjects and hence
comparative study is not possible.
• (iii) "99% of the people who drink alcohol die before atlainjng the age of 100
years. Hence drinking is harmful for longevity of life." This statement, too, is
incorrect since nothing is mentioned about the number of persons who do not drink
alcohol and die before attaining the age of 100 years.
• Thus, statistical arguments based on incomplete dala often lead to fallacious
 Reference text books
• Fundamentals of Statistics
S.C Gupta
Himalaya publishing house

• Statistics for Management

Richard I Levin &
David S Rubin
Peason Prentice Hall