INTRODUCTION TO BUSINESS STATISTICS

Definition of Statistics

The word 'statistics' refers to some numerical facts relating to any phenomena in social sciences or

exact sciences. Facts and figures pertaining to population, production, national income, profits,

sales, bank rates, family patterns, dowry system, animal kingdom, plant life, bacteria; will all

constitute statistics.

The word 'statistics' seems to have derived from either the Latin word 'status' or the Italian word

'Statitsta' both meaning 'a political state'. Although initially the term ‘statistics’ was used to refer

to the information relating to the activities of political state, the term now embraces much wider

meaning.

In its modern form, it is used in two distinct senses (plural sense and singular sense). In plural

sense, it means an aggregate or collection of numerical or quantitative expressions of facts i.e.

'numerical data' or simply 'data'. In the singular sense, it means a body of principles and methods

used in the collection, presentation, analysis and interpretation of numerical data.

According to Croxton and Cowden, "Statistics may be defined as a science of collection,

presentation, analysis and interpretation of numerical data”. (Singular Sense).

Professor Horace Secrist defines statistics as “the aggregate of facts affected to mark extent by the

multiplicity of causes, numerically expressed, enumerated or estimated according to a reasonable

standard of accuracy, collected in a systematic manner for the predetermined purpose and placed

in relation to each other”

Characteristics of Statistics

1. Statistics are aggregate of facts

Individual, single or unconnected figures are not statistics. Because they cannot be studied in

relation to each other. Due to this reason, only aggregate of facts e.g., data relating to I.Q. of a

group of students, academic achievement of students, etc. are called statistics and are studied in

relation to each other.

2. Statistics are affected by multiplicity of causes:

Statistics are usually affected by a large number of causes and it is difficult to study a cause

separately. It is only in physical sciences that individual causes can be traced and their impact is

clearly known. In statistical study of social sciences, we come to know the combined effect of

multiple causes. For example, the saving of person is affected by his income level, saving habit,

expenditure pattern, etc.

3. Statistics are numerically expressed:

Qualitative phenomena which cannot be numerically expressed, cannot be described as statistics

e.g. honesty, goodness, ability, etc. But if we assign numerical expression, it may be described as

‘statistics’.

4. Statistics are enumerated or estimated according to reasonable accuracy:

Usefulness of statistical data depends on their accuracy. These are not likely to be absolutely

accurate, but attempt should be made to minimize the error and maintain a fair degree of accuracy

in estimation.

5. Statistics are collected in a systematic manner:

In order to have reasonable standard of accuracy statistics must be collected in a very systematic

manner. Any rough and haphazard method of collection will not be desirable for that may lead to

improper and wrong conclusion.

6. Statistics for a pre-determined purpose:

The investigator must have a purpose beforehand and then should start the work of collection. Data

collected without any purpose is of no use. Suppose we want to know intelligence of a section of

people, we must not collect data relating to income, attitude and interest. Without having a clear

idea about the purpose, we will not be in a position to distinguish between necessary data and

unnecessary data or relevant data and irrelevant data.

7. Statistics are capable of being placed in relation to each other:

Statistics must be capable of being compared, otherwise, it will lose much of its value and

significance. Comparison can be made only if the data are homogeneous.

Functions of Statistics

The functions of statistics are as follows:

1. It presents fact in a definite form:

 Numerical expressions are convincing and, therefore, one of the most important functions

of statistics is to present statement in a precise and definite form.

2. It simplifies mass of figures:

The data presented in the form of table, graph or diagram, average or coefficients are

simple to understand.

3. It facilitates comparison:

Once the data are simplified they can be compared with other similar data. Without such

comparison the figures would have been useless.

4. It helps in prediction:

Plans and policies of organizations are formulated in advance at the time of their

implementation. Knowledge of future trends is very useful in framing suitable policies and

plans. Tends in past data help us predict the future trends of a particular phenomenon.

5. It helps in formulating and testing hypothesis:

Statistical methods are extremely helpful in formulating and testing hypothesis and to

develop new theories.

6. It helps in the formulation of suitable policies:

Statistics provide the basic material for framing suitable policies. It helps in estimating

export, import or production programs in the light of changes that may occur.
Types of Statistics

There are two major divisions of statistics:

(1) Descriptive Statistics, and

(2) Inferential Statistics.

(1) Descriptive Statistics:

Descriptive statistics uses the data to provide descriptions of the population, either through

numerical calculations or graphs or tables. Descriptive statistics deals with collecting,

summarizing, and simplifying data.

Figures, diagrams, charts, and graphs are also used for better presentation of the data. In

addition, the measures of central tendency, dispersion, skewness, and kurtosis are known

as descriptive statistics.

In short, descriptive statistics is one which describes the population. On the other end,

inferential statistics is used to make the generalization about the population based on the

samples

(2) Inferential Statistics:

Inferential statistics makes inferences and predictions about a population based on a

sample of data taken from the population in question. ANOVA (Analysis of Variance),

regression analysis are the examples of inferential statistics.

Limitations of Statistics

Limitations of statistics are as follows:

1. Statistics deals only with quantitative characteristics:

Statistics are numerical statements of facts. Data which cannot be expressed in numbers

are incapable of statistical analysis. Qualitative characteristics like honesty, efficiency,

intelligence etc. cannot be studied directly.

2. Statistics deals with aggregates not with individuals:

Since statistics deals with aggregates of facts, the study of individual measurements lies

outside the scope of statistics.

3. Statistical facts are not perfectly accurate:

Statistics deals with the phenomena which are affected by multiplicity of causes and it is

not possible to study the effect of these factors. Due to this limitation, the results obtained

are not perfectly accurate but only an approximation.

4. If sufficient care is not exercised in collecting, analyzing and interpretation the data,

statistical results might be misleading.

5. Statistics can be misused:

The greatest limitation of statistics is that they are liable to be misused. The data placed

to an inexperienced person may reveal wrong results. Only persons having fundamental

knowledge of statistical methods can handle the data properly.

Business Statistics

Business statistics involves the application of statistics tools and techniques to the business and

managerial problems for the purpose of decision making.

Importance of Statistics in Business

Statistics is an important field of study because of its application in almost all walks of life. It is

an important branch of mathematics. It is the analysis, interpretation, preservation, and

presentation of data. The uses of statistics in business and management are limitless. Statistics can

assists managers in finding out the optimum production capacity, ensuring efficient management

of work and employee performance, and controlling the wastage of resource, etc. Moreover,

statistics helps in sound decision making by providing accurate estimates about costs, demand,

prices, sales etc.

Primary Data vs. Secondary Data

Data collection plays a very crucial role in the statistical analysis. In research, there are different

methods used to gather information, all of which fall into two categories, i.e. primary data, and

secondary data.

Primary data is one which is collected for the first time by the researcher. Surveys, observations,

experiments, questionnaires personal interview, etc. are the various ways of collecting primary

data.
Secondary data is the data already collected or produced by others. Government publications,

websites, books, journal articles, internal records etc. are the sources of secondary data.