STATISTICS FOR BUSINESS DECISION M.DIVYA,B.

TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

UNIT I
INTRODUCTION
Statistics - Meaning and scope of business statistics - Roles of statistics for Business Decisions
- importance – Limitations - Type and collection of data - Classification and Tabulation of Data
- Diagrammatic Representation of data – Types of Charts - Graphical representation of data
Statistics.
Statistics is the branch of mathematics for collecting, analysing and interpreting data.
Statistics can be used to predict the future, determine the probability that a specific event
will happen
Example: An example of statistical analysis is when we have to determine the number
of people in a town who watch TV out of the total population in the town. The small
group of people is called the sample here, which is taken from the population.
Raw data.
Data is a collection of information gathered by observations, measurements, research
or analysis. They may consist of facts, numbers, names, figures or even description of
things.

Quantitative Data And Qualitative Data.

Qualitative: It describes the quality of something or someone. It is descriptive
information. For example, the skin colour, eye colour, hair texture, etc. gives us the
qualitative information about a person.
Quantitative: It provides numerical information. Example, the height and weight of a
person.

IMPORTANCE OF STATISTICS
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

LIMITATIONS OF STATISTICS

1. Statistics can study only numerical or quantitative aspects of a problem.

2. Statistics deals with aggregates not with individuals.
3. Statistical results are true only on an average.
4. Statistical laws are not exact.
5. Statistics does not reveal the entire story.
6. Statistical relations do not necessarily bring out the cause and effect
relationship between phenomena.
7. Statistics is collected with a given purpose.
8. Statistics can be used only by experts.

SCOPE OF BUSINESS STATISTICS.

 In States - Statistics was regarded as the “Science of Kings”. It supplies the essential
information to run the government, Policies are adopted by the government with the help
of statistics.
 In economics - In economics, the problems are studied by the use of statistical methods
economic loss is based on the study of collected statistical data. The loss economics
refer to statistics to prove their accuracy. Statistics in economics as given birth to a new
discipline called econometrics.
 In Business - In the competitive business, the business people face some like shortage
is overstocking, uneconomic crisis etc., which can be solved through statistical analysis.
To a greater extent statistics help the businessman maximize their profit.
 In Education - Statistics is widely used in education for research purpose. It is used to
test the past knowledge and evolved new knowledge.
 In Astronomy - Astronauts study the eclipse and astronocal issues by applying
statistics. They rely on estimation in many cases and it was corrected with the help of
statistics.
 In accounting - In accounting correlation analysis between profit and sales is widely
used. In auditing, Sampling techniques are commonly followed.
 In Banking - In this past developing technology, the banking sectorneeds a lot of
information about the present and future business development.
 In Investment Decision - Statistics helps an investors in selecting securities, which are
safe, yielding a good return an appreciation in the market price.
 In Insurance - Statistics is extensively used in the field of Insurance. Actuarial statistics
is must of the insurance company through fix the premium relates which is based on the
mortality tables.
 In Research - Market researchers largely depends upon statistical methods in drawing
conclusion
 In management - Statistical tools are used widely by business enterprises for the
promotion of new business.
 In Industry - In Industry statics is used in quality control through control charge which
has its basis on the theory of probability, normal distribution and inspection, which are
based on sampling techniques.
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

 In Medical sciences - In medical sciences, the test of significance by student T –test

for testing the efficiency of new drug, injection for controlling and curing specific ailments
is done carried out by statistics.
 In War - The theory of decision functions propounded by A.Wald can be of great
assistance to the military and technical personnel to plan maximum destruction with
minimum effort. Moreover, the statistical data obtained in the post war period reveal
some useful information for planning future military strategies.

ROLE OF BUSINESS STATISTICS IN BUSINESS DECISION.

 Uniformity
 Rational Decision Making
 Management Performance/Forecasting
 Organization and Presentation of Data
 Historical Research of a Business
1. Uniformity
For any business to be successful, there must be uniformity in the rendering of services.
There is always the existence of business ethics, laws, and even method of operation.
All these are encapsulated and stored as a reference purpose through the help of
Statistics. An important role of statistics in business is that it is expressed as a
percentage ratio, average, medium, and even a raw number. What is vital is that the
method used to calculate the statistics is uniform at every time.
2. Rational Decision Making
Statistical analysis enables an enterprise to measure the performances of a business
and identify trends. This enables the enterprise to make a rational decision, knowing
that their judgment is based on data and facts rather than mere assumptions. As a
result, better planning and predictions are made through statistical analysis of data and
figures.
3. Management Performance/Forecasting
The Usage of Statistics in business and management is limitless, with the proper skill to
implement statistical methods. For example, managers can increase the production
capacity of any plant or find out the optimum production capacity, efficient management
of work and employee performance, limit the wastage of resources, etc.
4. Organization and Presentation of Data
Every business deals with data from sales, advertisement, marketing, and other forms
of activity regarding the running and operation of the business. These data are, most
times, bulky and sensitive, and therefore, demands careful organization and
presentation when needed.
5. Historical Research of a Business
The best method to apply when researching a business or its history is by getting the
statistical data, including activities from the company/business. Even a non-specialist
can participate, contribute, and participate in historical research with a statistical
approach. This is because Statistics presents the surest information and data regarding
a business
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

METHODS OF COLLECTION OF DATA

A. Primary data collection

Primary data may be obtained by applying any of the following methods:

1. Direct Personal Interviews.

A face to face contact is made with the informants (persons from whom the information is to
be obtained) under this method of collecting data. The interviewer asks them questions
pertaining to the survey and collects the desired information. Thus, if a person wants to
collect data about the working conditions of the workers of the Tata Iron and Steel Company,
Jamshedpur, he would go to the factory, contact the workers and obtain the desired
information. The information collected in this manner is first hand and also original in
character.

2. Indirect Oral Interviews.

Under this method of data collection, the investigator contacts third parties generally called
‘witnesses’ who are capable of supplying necessary information. This method is generally
adopted when the information to be obtained is of a complex nature and informants are not
inclined to respond if approached directly. For example, when the researcher is trying to
obtain data on drug addiction or the habit of taking liquor, there is high probability that the
addicted person will not provide the desired data and hence will disturb the whole research
process. In this situation taking the help of such persons or agencies or the neighbours who
know them well becomes necessary. Since these people know the person well, they can
provide the desired data. Enquiry Committees and Commissions appointed by the
Government generally adopt this method to get people’s views and all possible details of the
facts related to the enquiry.

3. Information from Correspondents.

The investigator appoints local agents or correspondents in different places to collect
information under this method. These correspondents collect and transmit the information to
the central office where data are processed. This method is generally adopted by news
paper agencies. Correspondents who are posted at different places supply information
relating to such events as accidents, riots, strikes, etc., to the head office. The
correspondents are generally paid staff or sometimes they may be honorary correspondents
also. This method is also adopted generally by the government departments in such cases
where regular information is to be collected from a wide area. For example, in the
construction of a wholesale price index numbers regular information is obtained from
correspondents appointed in different areas.
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

4. Mailed Questionnaire Methods

Under this method, a list of questions pertaining to the survey which is known as
‘Questionnaire’ is prepared and sent to the various informants by post. Sometimes the
researcher himself too contacts the respondents and gets the responses related to various
questions in the questionnaire. The questionnaire contains questions and provides space for
answers. A request is made to the informants through a covering letter to fill up the
questionnaire and send it back within a specified time.

5. Schedule Sent Through Enumerators.

Another method of data collection is sending schedules through the enumerators or

interviewers. The enumerators contact the informants, get replies to the questions contained
in a schedule and fill them in their own handwriting in the questionnaire form. There is
difference between questionnaire and schedule. Questionnaire refers to a device for
securing answers to questions by using a form which the respondent fills in him self,
whereas schedule is the name usually applied to a set of questions which are asked in a
face-to face situation with another person. This method is free from most of the limitations of
the mailed questionnaire method.

B. Secondary Data Collection:

The various sources of secondary data can be divided into two broad categories:
1. Published sources, and
2. Unpublished sources.

1. Published Sources:

The governmental, international and local agencies publish statistical data, and chief among
them are explained below:
(a) International publications:
There are some international institutions and bodies like I.M.F, I.B.R.D, I.C.A.F.E and U.N.O
who publish regular and occasional reports on economic and statistical matters.
(b) Official Publications of Central and State Governments:
Several departments of the Central and State Governments regularly publish reports on a
number of subjects. They gather additional information. Some of the important publications
are: The Reserve Bank of India Bulletin, Census of India, Statistical Abstracts of States,
Agricultural Statistics of India, Indian Trade Journal, etc.
(c) Semi-Official Publications:
Semi-Government institutions like Municipal Corporations, District Boards, Panchayats, etc.
Publish reports relating to different matters of public concern.
(d) Publications of Research Institutions:
Indian Statistical Institute (I.S.I), Indian Council of Agricultural Research (I.C.A.R), Indian
Agricultural Statistics Research Institute (I.A.S.R.I), etc. Publish the findings of their research
programmes.
(g) Journals and News Papers:
Journals and News Papers are very important and powerful source of secondary data.
Current and important materials on statistics and socio-economic problems can be obtained
from journals and newspapers like Economic Times, Commerce, Capital, Indian Finance,
Monthly Statistics of trade etc.

2. Unpublished Sources:
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

Unpublished data can be obtained from many unpublished sources like records maintained
by various government and private offices, the theses of the numerous research scholars in
the universities or institutions etc.

CLASSIFICATION OF DATA

 It is the process of arranging data into homogeneous (similar) groups according to their
common characteristics.
 Raw data cannot be easily understood, and it is not fit for further analysis and
interpretation. Arrangement of data helps users in comparison and analysis.
 For example, the population of a town can be grouped according to sex, age, marital
status, etc.

Objectives of Data Classification

The primary objectives of data classification are:

 To consolidate the volume of data in such a way that similarities and differences can
be quickly understood. Figures can consequently be ordered in sections with common
traits.
 To aid comparison.
 To point out the important characteristics of the data at a flash.
 To give importance to the prominent data collected while separating the optional
elements.
 To allow a statistical method of the materials gathered.

characteristics of good classification.

 Comprehensiveness
 Clarity
 Homogeneity
 Suitability
 Stability
 Elastic

Types of classification

(1) Geographical ● When data are classified with reference to geographical locations
classification such as countries, states, cities, districts, etc., it is known as
geographical classification.
● It is also known as ‘spatial classification’.

(2) Chronological ● A classification where data are grouped according to time is

classification known as a chronological classification.
● In such a classification, data are classified either in ascending or
in descending order with reference to time such as years, quarters,
months, weeks, etc.
● It is also known as temporal classification’.
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

(3) Qualitative ● Under this classification, data are classified on the basis of some
classification attributes or qualities like honesty, beauty, intelligence, literacy,
marital status, etc.
● For example, the population can be divided on the basis of
marital status (as married or unmarried)

(4) Quantitative ● This type of classification is made on the basis of some

classification measurable characteristics like height, weight, age, income, marks of
students, etc.

TABULATION :
Tabulation is a systematic and logical representation of numeric data in rows and
columns to facilitate comparison and statistical analysis.

Objectives Of Tabulation:
(1) To simplify complex data

 It reduces the bulk of information, i.e., it reduces raw data in a simplified and
meaningful form so that it can be easily interpreted by a common man in less
time.
(2) To bring out essential features of data

 It brings out the chief/main characteristics of data.

 It presents facts clearly and precisely without textual explanation.
(3) To facilitate comparison

 The representation of data in rows and columns is helpful in simultaneous

detailed comparison on the basis of several parameters.
(4) To facilitate statistical analysis

 Tables serve as the best source of organised data for statistical analysis.
 The task of computing average, dispersion, correlation, etc., becomes easier if
data is presented in the form of a table.
(5) To save space

 A table presents facts in a better way than the textual form.

It saves space without sacrificing the quality and quantity of data

COMPONENTS OF A GOOD TABLE.

 Table No. : Each table should be numbered so that the table may be
referred with that number.
 Title : Every table must be given a suitable title which should be short,
clear and complete.
 Captions : Caption refers to the column heading which explains what the
column represents.
 Stubs : Stubs are the designations of the rows or row headings.
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

 Body : It is the heart of the table. The body of the table contains the
numerical information. Statistical Methods
 Ruling and Spacing : Ruling and leaving the space depends on the needs
of the topic and makes the table attractive and beautiful.
 Footnotes : In order to explain the figures shown in the table, explanatory
notes may be given at the end of the table.
 Source : At the end of the table, the source or origin of given data is
mentioned

SOLVED EXAMPLE
CLASSIFICATION AND TABULATION OF DATA
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

GRAPHICAL REPRESENTATION OF THE FREQUENCY DISTRIBUTION

1. The number of things sold in a month of January in a particular shop is

shown below. Draw a bar graph.

Solution:
 STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

2. Draw a histogram for the following table which represents the age groups
from 100 people in a village.

Solution:
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

3. The following is the distribution of time spent in the library by students in a

school.

Draw a frequency polygon using histogram.

Solution:
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC

4. Draw a pie chart for the given table.

Solution:
Converting the area in percentage into components parts of 360°, we have.

Continental Area.
STATISTICS FOR BUSINESS DECISION M.DIVYA,B.TECH(CSE), MBA, ASSISTANT PROFESSOR, SMVEC