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1 DEFINE STATISTICS?
2 STATISTICS IN BUSINESS:
➢ DESCRIPTIVE STATISTICS.
➢ ESTIMATION.
➢ HYPOTHESIS TESTING.
3 FREQUENCY DISTRIBUTION.
4 MANAGEMENT SCIENCES.
5 RELATIONSHIP BETWEEN STATISTICS AND
MANAGEMENT SCIENCES.
➢ PRESENTATION.
➢ ANALYSIS.
➢ INTERPRETATION.
6 AREAS OF KEEN INTEREST.
➢ OMISSION OF IMPORTANT FACTORS.
➢ CARELESSNESS.
➢ NON SEQUITUR.
➢ CONCEALED
➢ RESEARCH METHODS.
7 TOOLS OF QUALITY.
➢ HISTOGRAM & ITS IMPORTANCE.
➢ JOINT FREQUENCY DISTRIBUTION & ITS
IMPORTANCE.
➢ BAR CHARTS & ITS IMPORTANCE.
➢ PARETO CHARTS & ITS IMPORTANCE.
➢ PIE CHARTS & ITS IMPORTANCE.
➢ LINE CHARTS & ITS IMPORTANCE.
➢ FORECASTS.
➢ TIME SERIES ANALYSIS.
➢ TIME SERIES PLOT.
➢ SCATTER DIAGRAM.

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STATISTICS:
The term statistics is used in either of two senses. In common parlance it is
generally employed synonymously with the word data. Thus someone may say that
he has seen “statistics of industrial accidents in the united states.” It would be
conducive to greater precision of meaning if we were not to use statistics in this
sense, but rather to say “data of industrial accidents in the united states.”
“Statistics” also refers to the statistical principles and methods which have been
developed for handling numerical data and which form the subject matter of this
text. Statistical methods or statistics range from the most elementary descriptive
devices which may be understood by anyone to those extremely complicated
mathematical procedures which are comprehended by only the most expert’s
theoreticians. It is the purpose of this volume not to enter into the highly
mathematical and theoretical aspects of the subject but rather to treat of its more
elementary and more frequently used phases.
Statistics may be defined as the collection, presentation, analysis and interpretation
of the numerical data. The facts which are dealt with must be capable of numerical
expressions. We can make little use statistically of the information that dwellings
are built of bricks, stone, wood and other materials, however if we are able to
determine how many or what proportion o dwellings are constructed of each type
material we have numerical data suitable for statistical analysis.

STATISTICS IN BUSINESS/BUSINESS STATISTICS:


A collection of tools and techniques that are used to convert data into meaningful
information in a business environment.

DESCRIPTIVE STATISTICS: The tools and techniques that compromise


business statistics include those specially designed to describe data such as charts,
graphs and numerical measures. Also included are inferential tools that help
decision makers draw inferences from a set of data. Inferential tools include
estimation and hypothesis testing.

The inferential tools includes two things the estimation and hypothesis testing.
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ESTIMATION: In situations where one would like to know about all the data in
large data sets but it is impractical to work with all the data, decision makers can
use techniques to estimate what the larger data set looks like. The estimates are
formed by looking closely at a subset of the larger data set.

HYPOTHESIS DEVELOPMENT: Once the decision maker identified the


important variables in a situation and established the relationship among them
through logical reasoning in the theoretical framework the decision maker is in a
better position to test whether the relationship that have been theorized do in fact
hold true. By testing these relationships scientifically through appropriate
statistical analysis or through negative case analysis in qualitative research we are
able to obtain reliable information on what kind of relationships exist among the
variables operating in the problem situation. The results of these tests offer the
decision maker some clues as to what could be changed in the situation to solve the
problem. Formulating such testable statements is called hypothesis development.
FREQUENCY DISTRIBUTION:
Frequency distribution is a summary of a set of data that displays the number of
observations in each of the distribution’s categories and classes.
MANAGEMENT SCIENCE:

RELATIONSHIP OF STATISTICS AND MANAGEMENT


SCIENCES:
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The statistics plays a very crucial role in the field of management science. It is
practically in practice in the organizations. The management’s main responsibility
is to make logically sound decisions and the base of the decisions is the data that
depends on the work and the statistical tools. So the statistical is inevitable for the
business.

PRESENTATION:
Either for one’s own use or for the use of others the data is presented in some
suitable form. Usually the figures are arranged in tables or represented by graphic
devices as discussed below:
➢ Text presentation .
➢ Tabular presentation .
➢ Semi tabular presentation.
➢ Graphic presentation.
TEXT PRESENTATION: Combining figures and text is not a particularly
effective device, since it is necessary to read, or at least scan, all of the paragraphs
before one can grasp the meaning of the entire set of figures. Most person cannot
easily comprehend the data when set forth in this manner, and it is especially
difficult for the reader to single out individuals. There is an advantage, however
that the writer can direct attention to, and thus emphasize, certain figures and can
also attention to comparisons of importance.

TABULAR PRESENTATION: This method of setting forth statistical data is


usually superior to the use of text. A table of its title should be fully self
explanatory although it may frequently be accompanied by a paragraph of
interpretation or a paragraph directing attention to important figures. It is readily
seen that the table is much briefer than the text statement since the row and column
headings eliminate the necessity of repeating explanatory matter. As no text
appears with the figures, the presentation is more concise. The logical arrangement
of items in the stub and the box head makes a table clear and easy to read. The use
of columns and rows for the figures facilitates comparisons.

SEMITABULAR PRESENTATION: This method is not often used, but it is


survivable in that the figures are made to stand out from the text as they would not
do if worked into one or two sentences. Incidentally the figures can be more
readily compared than if they were in the text.
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GRAPHIC PRESENTATION: Graphic devices are extremely useful and
effective for quickly presenting a limited amount of information.

ANALYSIS:
In the process of analysis, data is classified into useful and logical categories. The
possible categories must be considered when plans are made for collecting the
data, the data is classified as they are tabulated and before they can be shown
graphically. Thus the process of analysis is partially concurrent with collection and
presentation. There are four important bases of classification of statistical data:
➢ Qualitative
➢ Quantitative
➢ Chronological
➢ Geographical

QUALITATIVE: When for example employees are classified as union or non


union we have a qualitative differentiation. The distinction is one of kind rather
than of amount. Individuals may be classified concerning material status, as single,
married, widowed, divorced and separated.

QUANTITATIVE: When items are varying in respect to some measureable


characteristics, a quantitative classification is appropriate. Families may be
classified according to the number of children. Manufacturing concerns may be
classified according to the number of workers employed, and also according to the
value of goods produced. Individuals may be classified according to the amount of
income tax paid. Most quantitative distributions are frequency distributions.

CHRONOLOGICAL: Chronological data or time series show figures concerning


a particular phenomenon at various specified times. In a certain sense time series
are somewhat akin to quantitative distributions in that each succeeding year or a
month of a series is one year or month further removed from from earlier point of
reference. Occasionally a time series may be converted into a frequency
distribution.

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GEOGRAPHICAL: The geographical distribution is essentially a type of
qualitative distribution, but is generally considered as a distinct classification.
Sometimes a geographical distribution may be put into the form of a frequency
distribution.

INTERPRETATION: The results is interpreted in the light of the limitations of


the original material. Too exact conclusions must not be drawn from data which
themselves are but approximations. It is essential however, that the investigator
discovers and clarify all the useful and applicable meaning which is present in its
data.

AREAS OF KEEN INTEREST:


➢ Omission of important factors.
➢ Carelessness.
➢ Non sequitur.
➢ Concealed classification.
➢ Research methods.

EXPLANATION:

OMISSION OF IMPORTANT FACTOR: This can be easily be understood by


the example that one year certain manufacturing company felt called upon to prove
that all metal tops did not result in hotter car interiors. They suggested that a test
involving three steps:
1) Take a piece of top fabric about 8 inches square. Place a piece of lining
material of similar size beneath the fabric and a thermometer beneath the
lining material.
2) Take a piece of highly finished steel about 8 inches square. Placed similar
sized pieces of ¼ inch felt and lining material beneath the metal and a
thermometer beneath the lining material.
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3) Place each of the above assemblies on a board at room temperature. Carry
the entire apparatus out into hot sunshine, leave it exposed for about 10
minutes and then read the
Temperature of the thermometer.

CARELESSNESS: Human beings cannot go through life without making


mistakes, but should be reduced to a minimum.

NON SEQUITUR: This can easily be understood by an example of one of the


weekly news magazine the circulation of which had been growing in a healthy
fashion, undertook to demonstrate for a particular year that its readers greatly
exceeds in circulation. It is possible because of the involvement of statistics which
tells the exact figures of the increase in the number of readers and the number of
magazines in circulation.

CONCEALED CLASSIFICATION: Conclusions drawn from the statistical data


may sometimes be invalid because of the presence of the concealed classification
which is overlooked. One such concealed classification was found to be present in
a study of suicides. The data seemed to show that suicides were more likely to
occur among certain religious groups than among others. Upon further
consideration it was apparent that the matter of the urban or rural occurrence of the
suicides had been overlooked.

RESEARCH METHODS: It is assumed that the statistical method is the only


method to be used in research; neither should this method be considered as the best
attack for every problem. There are various method followed in the research that
includes the case study method, experimental method, deductive method and the
inductive method. The complementary nature of these methods of research is also
reflected in operations research. This relatively new field is the application o
quantitative methods to specific management problems which revolve around the
use of men and machines within an organization. The objective is to optimize the
solution to the problems. In operation research (sometimes called management
science) the principles of such physical science as physics and chemistry are
frequently combined. Of particular importance in operation research is the
mathematical techniques of linear programming in which the inputs, the outputs
and the objectives are completely quantified.

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TOOLS OF QUALITY:
➢ Histogram.
➢ Joint frequency distribution.
➢ Bar charts.
➢ Pareto charts.
➢ Pie charts.
➢ Line charts.
➢ Forecasts.
➢ Time series analysis.
➢ Time series plot.
➢ Scatter diagram.

HISTOGRAM: A graph called histogram can be used to transform a frequency


distribution into a visually appealing format. Histogram is a graph of frequency
distribution with the horizontal axis showing classes the vertical axis showing the
frequency count and the rectangles having a height equal to frequency in each
class.
Histogram is very useful for decision making when a data is of sequential nature
and result required in comparison form to be shown to the management or directors
for choosing among various options given. Such methods of pictogram clearly give
the decision maker an idea in a bird’s eye view without going through the whole
data.

JOINT FREQUNCY DISTRIBUTION: Frequency distributions are effective


tools for describing data. Joint frequency distribution is a summary of a vicariate
set of data that displays the number of observations that exhibit the respective joint
characteristics of one value taken from each of the variables that define the data
set.
Distributions or data which is shown or required in such a manner that each
variable is connected with the other hand or accumulated previous data so that the
analyst can draw the result through escalated values.
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BAR CHARTS: Bar charts are the graphical presentation of a categorical data set
in which a rectangle or bar is drawn over each category or class. The length of each
bar represents the frequency or percentage of observations contained in a category.
The bars may be vertical or horizontal. The bars may all be the same color or they
may be different colors depicting different categories. Additionally multiple
variables can be graphed on the same bar chart.
When data has different values under same heads like prices of food grains, cost of
living indexes etc then bar charts are used to help the decision maker to analyze
various and multiple nature values single glance. By multiple or complexbar charts
joint data like sales of different items in given month, in a given time period,
profits of different cumulative distributions in time period can be analyzed and
compared and decision can be arrived quickly otherwise detailed study would have
been required.
Example diagram:

PARETO CHARTS: Pareto charts is a bar chart that is sorted so that the
categories or classes are arranged from highest to the lowest with respect to the
magnitude of the displayed variable associated with each category or class.
These charts are used for ascending and descending order data i.e. four products
are being manufactured in an organization and their respective sales is to be shown
for deciding to give away the least selling commodity. Pareto chart is used in
ascending order hence the least or the last bar drawn will show the least selling
commodity. Yet it is another important tool of decision making.

PIE CHARTS: A pie chart is a graph in the shape of a circle. The circle is divided
into slices corresponding to the categories or classes to be displayed. The size of
the slices is proportional to the magnitude of the displayed variable associated with
each category or class.
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These charts represents the different sales volume of many things such as sales of
car in a given year, sales of costumes etc. when total of a given data is known and
it required to show the proportion of various value in the whole or share of
individual items in the whole then pie chart is used for determining the larger or
smaller share. Pie charts also helps the organization in decision making because the
suggestions given by different employees can easily be accumulated by such charts
and it also represents the most weighted opinion or the suggestion which helps the
organization to be stuck at the best option.
Example diagram:

Sales
1st Qtr 8.2
2nd Qtr 3.2
3rd Qtr 1.4
4th Qtr 1.2

LINE CHARTS: Line charts are two dimensional charts showing time on the
horizontal axis and the variable of interest on the vertical axis.
When trends are require to deciding about the future, decision making or
determining the future performance of the sales, production, employees turnover
etc line charts are used. They represents comparisons between trends of previous
year in different phases i.e. months, forth night, quarters, semis etc. with the
previous year’s trends with similar backups.

Example:
Series Series Series
1 2 3
Categor
y1 4.3 2.4 2
Categor
y2 2.5 4.4 2
Categor
y3 3.5 1.8 3
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Categor
y4 4.5 2.8 5

FORECASTS: No organization large or small can function effectively without a


demand forecast for the goods or services provides. A retail clothing store must
forecast the demand for the shirts it sells by the shirt size. The concessionaire at
dodger stadium at Los Angeles must forecast each game attendance to determine
how many soft drinks and hot dogs to have on hand. The state elected officials
must forecast tax revenues in order to establish a budget each year. There are only
a few of the instances in which forecasting is required. For many organizations the
success of the forecasting effort will play a major role in determining the general
success of the organization. When one graduate and join the organization in the
public or the private sector, that person will almost definitely be required to
prepare forecast or to us forecast provided by someone else in the organization.
One would not have an access to crystal ball on which to rely for an accurate
prediction of the future.

TIME SERIES ANALYSIS: Decision makers often confuse in forecasting and


planning. Planning is the process of determining how to deal with the future. On
the other hand forecasting is the process of predicting what the future will be like.
Forecasts are used as inputs for the planning process.
Experts agree that good planning is essential for an organization to be effective.
Since forecast is an important part of the planning process. You need to be familiar
with forecasting methods. There are two broad categories of forecasting
techniques:
a) Qualitative forecasting technique.
b) Quantitative forecasting technique.

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The qualitative forecasting technique are based upon expert opinion and judgment.
Qualitative forecasting techniques are based on statistical methods for analyzing
quantitative historical data.
In general quantitative forecasting techniques are used whenever the following
conditions are true:
a) Historical data relating to the variable to b forecast exist.
b) The historical data can be quantified.
c) One can assume that the historical pattern will continue in the future.
If these conditions do not exist qualitative forecasting techniques may be
employed.

TIME SERIES PLOT: Time series plot is a two dimensional plot of time series.
The vertical axis measures the variable of interest and the corresponds to the time
period. In plotting the time series the following steps are to be followed:
➢ Model fitting.
➢ Model diagnosis.
➢ Forecasting period.
➢ Forecasting intervals.

MODEL FITTING: Model fitting is the process of determining how well a


specified a model fits past data.
The idea is that if the future trends look like the past a model must adequately fit
the past data to have a reasonable chance of forecasting the future. As a forecaster
the decision maker will spend much time selecting the models specification and
estimating the models parameters to reach an acceptable fit of the past data.

MODEL DIAGNOSIS: Model diagnosis is the process of determining how well


the model fits the past data and how well the models assumptions to be satisfied.
The decision maker will need to determine how well the model fits the past data,
how well it performs in forecasting trials, and how well the models assumptions
appear to be satisfied. If the model is unacceptable in any of these areas the
decision maker will be forced to revert to the model specification step and begin
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again. An important consideration when the decision makers are developing
forecasting model is to use the simplest available model that will meet the decision
makers forecasting needs. The objective of forecasting is to provide the good
forecast. The decision maker does not feel that the sophisticated approach is better
if a simpler one will provide acceptable forecast.

FORECASTING PERIOD: Forecasting period is the unit of time for which


forecasts are to be made.
The forecasting period may be one day, one month, a week, a quarter or a year.
Thus the forecasting horizons consist of one or more forecasting periods. If
quantitative forecasting is to be employed, historical quantitative data must be
available for a similar period. For instance if we want weekly forecast, weekly
historical data must be available.

FORECAST INTERVALS: Forecasting intervals are the frequency with which


new forecasts are prepared.
The forecasting interval is generally the same length as the forecast period. That is,
if the forecast period is one week, then we will provide a new forecast each week.

SCATTER DIAGRAM: Scatter diagram is a two dimensional graph of plotted


points in which the vertical axis represents values of the other. Each plotted point
has coordinates whose values are obtained from the respective variables.

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