Business Statistics

Books for business statistics

• Levin, D., Stephan, D., & Szabat, K.; “Statistics for

Managers”: Pearson Publication
• Anderson, Sweeney and Williams; “Statistics for
Business and Economics”: Cengage Learning,
2001(11e).
• Ken Black; “Business Statistics: For Contemporary
Decision Making”, Wiley Publication
• Srivastava, T. & Rego, S; “Statistics for
Management”: McGraw Hill Education
 Introduction
• What is business statistics?

• Why business statistics?

• What are the features of business statistics?

• Who are the functions of business statistics?

What is business statistics?

• It is the process of analyzing, categorizing,

interpreting and compiling data.
• Business administrative professionals make
inferences from these data sets regarding
products, markets and consumers to help
organizations make informed decisions.
• Various statistical models can then be derived
from this data to interpret trends and gain
insights.
 Why business statistics?

To understand and write

• Business articles in newspaper and magazine
• Television reports on economy, industry and
business affairs
• Business research
• Research papers in journals
• Project reports
 Uses of business statistics

• To summarize the business data

• To draw conclusions from business data

• To improve business process

• To make reliable forecasts about business

activities
 Features of business
statistics

• Numerically expression

• Capable of comparison and connection

• Systematic manner of numbers

• Definite purpose

• Reasonable standard of accuracy

 Functions of business
statistics

• Simplification of data and figures

• Facilitates evaluation
• Helps in prediction
• Formulation and testing of hypothesis
• Formulation of suitable policies
• Trend market and investment behavior
 Application of statistics

• Accounting: Sample testing makes the audit very

easy and less time consuming
• Finance: Data analysis of stocks helps in
investment decision making.
• Marketing: Consumer purchasing data can revel
the consumer behavior which can be used for
marketing of products.
• Production: Demand data used for prediction of
future demand which helps in production
planning.
 Basic Vocabulary of
Business Statistics

• Variables

• Data

• Population

• Sample

• Parameter
 Variables

• A variable is a characteristic or condition that

can change or take on different values.

• Most research begins with a general question

about the relationship between two variables
for a specific group of individuals.
 Population

• The entire group of individuals is called the

population.
• For example, a researcher may be interested
in the relation between class size (variable 1)
and academic performance (variable 2) for the
population of fifth standard children.
 Sample

• Usually populations are so large that a

researcher cannot examine the entire
group. Therefore, a sample is selected to
represent the population in a research
study. The goal is to use the results
obtained from the sample to help answer
questions about the population.
 Population & Sample

• Selection of sample is very important because from

analysis of sample data hypothesis are tested and
statistical inference were drawn for whole population.
• For example, testing of COVID vaccine on selected
people (sample) and based on their result drawing the
inference of the impact of the vaccine on whole
population.
• Similarly, during government election in exit polls only
decision of few people were asked and based on that
inference is drawn that which political party is going to
take responsibility of the state or nation.
Population Vs. Sample
Population - Sample
 Branches of business
statistics

Descriptive Statistics Inferential Statistics

• Collection of data • To draw a conclusion

• Summarizing of data • Data collection from small

• Presentation of data group to draw conclusions
about a larger group.
• Analysis of data
• Making an estimation
Branches of business statistics

• Descriptive statistics: It is representation of

the data in the form of table, graph, charts,
etc. that make understanding of the data
easier.
• Descriptive statistics revels the important
characteristics of the data. Such as Central
Tendency, Measures of Variability, and Shape
etc.
Branches of business statistics

• Inferential statistics: statistical inference involves

generalizations and statements about the probability of
their validity.
• The methods and techniques of statistical inference
can also be used in a branch of statistics called decision
theory.
• Knowledge of decision theory is very helpful for
managers because it is used to make decisions under
conditions of uncertainty.
• For example, a manufacturer of stereo sets cannot
specify precisely the demand for its products.
 Central Tendency-Mean
• Mean: The mean of a set of observations is
their average. It is equal to the sum of all
observations divided by the number of
observations in the set, which is popularly
known as arithmetic mean.
Central Tendency-Median
• The median is the middle number in a sorted,
ascending or descending, list of numbers and
can be more descriptive of that data set than
the average. The median is sometimes used as
opposed to the mean when there are outliers
in the sequence.
• Extreme values do not affect the median,
making the median a good alternative to the
mean when such values exist in the data.
 Mean vs. Median
• Using the collected data, you compute the mean to discover the
“typical” time it takes for you to get ready. For these data:
Day 1 2 3 4 5 6 7 8 9 10
Time (Minutes) 39 29 43 52 39 44 40 31 44 35

• Mean = 396/10=39.6
• The original mean, 39.6 minutes, had a middle, or central, position
among the data values: 5 of the times were less than that mean
and 5 were greater than that mean.
Day 1 2 3 4 5 6 7 8 9 10
Time (Minutes) 39 29 103 52 39 44 40 31 44 35
• New Mean = 456/10 = 45.6
• In contrast, the mean using the extreme value is greater than 9 of
the10 times, making the new mean a poor measure of central
tendency.
 Median

You compute the median by following one of two rules:

Rule 1: If the data set contains an odd number of values,
the median is the measurement associated with the
middle-ranked value.
Rule 2: If the data set contains an even number of
values, the median is the measurement associated with
the average of the two middle-ranked values.
 Median - Illustration
• Nutritional data about a sample of seven breakfast
cereals (stored in Cereals ) includes the number of
calories per serving. Compute the median number of
calories in breakfast cereals.
Cereal Calories
Kellogg’s All Bran 80
Kellogg’s Corn Flakes 150
Wheaties 100
Nature’s Path Organic Multigrain Flakes 170
Kellogg’s Rice Krispies 110
Post Shredded Wheat Vanilla Almond 160
Kellogg’s Mini Wheats 180

• Median = 7+1/2 = 4th = 150

 Median - Illustration
• Find the median from the following:

• Median = 10+1/2 = 5.5th

= 39.5

• Median = 10+1/2 = 5.5th

• = 39.5
 Median - Illustration
• Using the collected data, you compute the
average time it takes for you to get ready. For
these data:

• Mean = 45.6
• Median = 10+1/2 = 5.5th
 Mode
• The mode is the value that appears most frequently. Like the
median and unlike the mean, extreme values do not affect the
mode. For a particular variable, there can be several modes or no
mode at all.
• For example, for the sample of 10 times to get ready in the
morning:
29 31 35 39 39 40 43 44 44 52
• There are two modes, 39 minutes and 44 minutes, because each of
these values occurs twice.
• However, for this sample of 14 smartphone prices offered by a
cellphone provider (stored in Smartphones ):
56 71 73 74 90 179 213 217 219 225 240 250 500 513
• There is no mode. None of the values is “most typical” because
each value appears the same number of times (once) in the data
set.
 Geometric Mean
• The Geometric Mean (GM) is the average value or
mean which signifies the central tendency of the set of
numbers by finding the product of their values.
Basically, we multiply the numbers altogether and take
the nth root of the multiplied numbers, where n is the
total number of data values. For example: for a given
set of two numbers such as 3 and 1, the geometric
mean is equal to √(3×1) = √3 = 1.732.

• In other words, the geometric mean is defined as the

nth root of the product of n numbers.
 Illustration
• What is the geometric mean of 2, 3, and 6?
First, multiply the numbers together and then
take the cubed root (because there are three
numbers) = (2*3*6)1/3 = 3.30
• Note: The power of (1/3) is the same as the
cubed root 3√. To convert a nth root to this
notation, just change the denominator in the
fraction to whatever “n” you have.
 Case-1

• Assume yourself as a market researcher and you

are required to map the growth potential of the
automobile companies.
• For which, you have chosen Hero motors, Bajaj
motors and TVS motors as your sample size.
• Now describe the growth potential of these
companies through using the measures of central
tendency.
 Universe of Data

• Cross-sectional data • Individual series

• Time-series data • Discrete series
• Panel data • Continuous series
 Measures of Dispersion
• Measures of dispersion help to describe the variability
in data. It can be used to describe the extent to which
data is scattered.
• Used to quantify the dispersion of data.
• It can be defined as positive real numbers that
measure how homogeneous or heterogeneous the
given data is.
• The value of a measure of dispersion will be 0 if the
data points in a data set are the same. However, as the
variability of the data increases the value of the
measures of dispersion also increases.
Few Scenarios
 Variance
• It shows the dispersion of the data from mean.
• Every population has a variance, which is
symbolized by 𝜎^2 (Sigma square).
• Population variance is calculated by dividing the
sum of the squared distances between the mean
and each item in the population by the total
number of items in the population.
• By squaring each distance, we make each number
positive and, at the same time, assign more
weight to the larger deviations (deviation is the
distance between the mean and a value).
 Variance
• Formula for Variance

• The variance (σ2), is defined as the sum of the

squared distances of each term in the
distribution from the mean (μ), divided by the
number of terms in the distribution (N)
 Standard Deviation
• The standard deviation is a measure of the amount
of variation or dispersion of a set of values.
• A low standard deviation indicates that the values
tend to be close to the mean (also called the
expected value) of the set, while a high standard
deviation indicates that the values are spread out
over a wider range.
• Population SD Sample SD
 Illustration
• From the below given stock price of the Mahindra
& Mahindra Ltd, find the average stock price,
average stock return and deviation.
Date Adj Close Date Adj Close
5/23/2021 796 6/7/2021 804
5/24/2021 810 6/8/2021 808
5/25/2021 811 6/9/2021 804
5/26/2021 823 6/10/2021 807
5/27/2021 829 6/11/2021 809
5/28/2021 846 6/14/2021 807
5/31/2021 808 6/15/2021 809
6/1/2021 806 6/16/2021 807
6/2/2021 806 6/17/2021 805
6/3/2021 802 6/18/2021 788
6/4/2021 804
 Illustration
• From the below given stock price of the SUN
Pharma and Dr. Reddy Lab, find their average
stock return and deviation.
Date SUN Pharma-SP Date Dr. Reddy SP
6/4/2021 674.20 6/4/2021 5255.00
6/7/2021 675.05 6/7/2021 5219.20
6/8/2021 678.85 6/8/2021 5274.75
6/9/2021 672.80 6/9/2021 5222.80
6/10/2021 676.10 6/10/2021 5292.05
6/11/2021 681.25 6/11/2021 5453.00
6/14/2021 677.25 6/14/2021 5461.35
6/15/2021 673.20 6/15/2021 5410.85
6/16/2021 669.10 6/16/2021 5406.10
6/17/2021 664.70 6/17/2021 5286.50
6/18/2021 668.40 6/18/2021 5283.90
 Illustration
• From the below given sales revenue of the ITC
and HUL, find their mean sales growth and
deviation.

Year Sales-ITC (Rs. Mil) Sales-HUL (Rs. Mil)

2016 180 256
2017 192 267
2018 203 284
2019 195 276
2020 174 242
2021 181 248
 Co-efficient of Variation
• Standard deviation is an absolute measure, while co-
efficient of variation is a relative measure.
• COV is facilitate a meaningful comparison between
two independent variables.
• COV paves the way for a comparative analysis
between two unrelated entities.
 Illustration
• The weekly sales of two products A and B were
recorded as given as given below:
Product A Product B
59 150
75 200
27 125
63 310
29 330
28 250
56 225
• Find out which of the two shows greater fluctuation in
sales.
 Data representation
• Data can be classified as either categorical or
quantitative.
• Categorical data use labels or names to identify
categories of like items.
• Quantitative data are numerical values that indicate
how much or how many.
• Tabular and graphical displays can be found in annual
reports, newspaper articles, and research studies.
• Data visualization is a term often used to describe the
use of graphical displays to summarize and present
information about a data set.
 Frequency Distribution

• A frequency distribution is a tabular summary of data

showing the number (frequency) of observations in
each of several non overlapping categories or
classes.
• Example: Data from a sample of 50 soft drink
purchases.
 Frequency Distribution

• Relative frequency distribution gives a tabular summary of

data showing the relative frequency for each class.
• Percent frequency distribution summarizes the percent
frequency of the data for each class.
Frequency Distribution
 Bar Charts
• A bar chart is a graphical display for depicting
categorical data summarized in a frequency, relative
frequency, or percent frequency distribution.
 Pie Charts
• Pie chart provides another graphical display
for presenting relative frequency and percent
frequency distributions for categorical data.
 Frequency distribution for
quantitative data
• To construct a frequency table, we divide the
observations into classes or categories. The
number of observations in each category is called
the frequency of that category.
• When dealing with Quantitative data (data that is
numerical in nature), the categories into which
we group the data may be defined as a range or
an interval of numbers, such as 0 − 10 or they
may be single outcomes (depending on the
nature of the data).
 Frequency distribution for
quantitative data
• Number of classes/categories: Classes are formed
by specifying ranges that will be used to group
the data.
• Width of the classes:
• Class limits: Class limits must be chosen so that
each data item belongs to one and only one class.
• The lower class limit identifies the smallest
possible data value assigned to the class. The
upper class limit identifies the largest possible
data value assigned to the class.
 Illustration
• Total number of days spent in audit in each
year-end is given in the table. Assume a class
size of 5. Make a frequency table and also
show dot plot and histogram.
 Illustration
• Class number = 5
• Class width = (33−12)/5 = 21/5 = 4.2 ≈5
• Class intervals: 10-14; 15-19; 20-24; 25-29; 30-
34
 Illustration
• One of the simplest graphical summaries of
data is a dot plot.
• A horizontal axis shows the range for the data.
Each data value is represented by a dot placed
above the axis.
• Example, Audit time data
 Histogram
• Histogram can be prepared for data previously
summarized in either a frequency, relative
frequency, or percent frequency distribution.
 Scatter Diagram and
Trend line
• A scatter diagram is a graphical display of the
relationship between two quantitative variables.
• A trend line is a line that provides an approximation of
the relationship.
• Example: Consider the advertising/sales relationship
for a stereo and sound equipment store in San
Francisco. On 10 occasions during the past three
months, the store used weekend television
commercials to promote sales at its stores. The
managers want to investigate whether a relationship
exists between the number of commercials shown and
sales at the store during the following week.
 Scatter Diagram and
Trend line

Sample data Scatter plot

TYPES OF RELATIONSHIPS DEPICTED BY
SCATTER DIAGRAMS
 Questions-1
• The mean yearly salary paid to all employees
in a company was Rs. 24, 00, 000. The mean
yearly salaries paid to male and female
employees were Rs. 25,00,000 and Rs.
19,00,000 respectively. Find out the
percentage of male to female employees in
the company.
 Questions-2
• The owner of a general store was interested in
knowing the mean of the contribution of his
stock of 5 products. The data is given below:
Product Contribution (Rs.) Quantity sold (U)
1 6 160
2 11 60
3 8 260
4 4 460
5 14 110