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Sinimole K.R.

Definition

“Statistics are the numbers of the state: The numbers or symbols that formally summarize our observations of the world”

Business statistics

Business Statistics is a science assisting

you to make business decisions under uncertainties based on some numerical and measurable scales. Decision making processes must be based on data, neither on personal opinion nor on belief.

Statistics in business The need for statistical information in smooth functioning of an undertaking increases along with its size. . public or private. No business large or small. can flourish in these days of largescale production and cut –throat competition without the help of statistics.

and importantly in the business context. an amazing diversity of data is available for inspection and analytical insight. In all aspects of our lives. .. Today's good decisions are driven by data.Cont.

analyze and interpret data relevant to their decision-making. They need statistical modelbased decision support systems. Statistical skills enable them to intelligently collect.Business managers and professionals are increasingly required to justify decisions on the basis of data. .

Add substance to decisions.Statistical concepts and statistical thinking enable them to: Solve problems in a diversity of contexts. Reduce guesswork. .

In short

In your future life and career, you will need to

be able to make good use of such information to make sound decisions.

Statistics

Art and Science of Collecting and Understanding DATA:

DATA = Recorded Information

e.g., Sales, Productivity, Quality, Costs, Return, …

**Why? Because you want:
**

Best use of imperfect information:

e.g., 50,000 customers, 1,600 workers, 386,000 transactions,… Good decisions in uncertain conditions: e.g., new product launch: Fail? OK? Make you rich? Competitive Edge e.g., for you in the job market!

Activities of Statistics

1. Designing the study:

First step Plan for data-gathering Sampling

**2. Exploring the data:
**

First step (once you have data) Look at, describe, summarize the data Are you on the right track?

Estimating an unknown: Best “guess” based on data Wrong .“we’re 95% sure that the unknown is between …” . Modeling the data A framework of assumptions and equations Parameters represent important aspects of the data Helps with estimation and hypothesis testing 4.Activities of Statistics (continued) 3.by how much? Confidence interval .

Activities of Statistics (continued) 5. Hypothesis testing: Data decide between two possibilities Does “it” really work? [or is “it” just randomly better?] Is financial statement correct? [or is error material?] .

production .Data Mining Search for patterns in large data sets Businesses data: marketing. maintaining. often useful for others From government or private companies Makes use of Statistics – all the basic activities.g. sales or costs) . organizing. classification. analyzing data Optimization – calculations to achieve a goal Maximize or minimize (e.. Collected for some purpose. clustering Computer science – efficient algorithms (instructions) for Collecting. and Prediction. finance.

Descriptive Statistics & Inferential Statistics .

Descriptive helps us to Inferential help us to Observe more Acutely Formulate & test hypotheses .

be scri es e to d eatur used sic f ta ba the f the da y d o a stu in Descriptive Statistics Single Numerical Summaries of a batch •It references to a given batch of data rather than to a more general population or class. Such as an average. •Leads to formulate laws or test hypotheses .

Descriptive Statistics Characterize your data in simple but informative ways .

A sample of ten students selected (one by one ) from a class of hundred students includes boys and girls in the order: GBGGBGBGGB. 2. . Six girls and four boys were included in a sample of ten students from a class of hundred students.Consider the following statements 1.

this information is then put in a comprehensive manner in the second statement. . After making some computations.The first of the above statements provides information (data) regarding the sex of ten students chosen in a sample in its raw form.

The data in its secondary form as in (2) are also called statistics.The data in its original form as in (1) are called statistics. . We can thus say that we compute statistics (data as in(2)) from statistics (data in original form as in (1)) with the help of statistics.

their classification. presentation of data with the help of tables. the analysis involving computations of data from the classified data and the interpretation of the computed data called statistics which leads one to the conclusions and recommendations that can be implemented in practice. diagrams. graphs.Or we can say that The science of statistics deals with the collection of data called statistics. .

It is very important for a statistician to ensure that any inference that he draws or any recommendations that he makes should be practical.Importance of relevant information. .

. 190c. 2nd . 180c. 3rd and 4th day of January last year as 200c .Example Suppose for instance you are furnished with the data about the minimum temperature recorded in Mumbai on 1st . 170c respectively.

the decrease being 10c per day.Example You are asked to forecast the minimum temperature that may be recorded on 1st of May of the same year. you find that there is a decreasing trend. . Hence one may expect that after 120 days from 1st January. If you carefully study the data.e. the temperature would be 200c – 120* 10c= -1000c. i. on first May.

For obtaining such an estimate. .Example But it is practically impossible. the above case the information supplied to you is irrelevant. one requires the relevant information. What you need is the information about the temperature recorded on 1st May of last few years. For instance. Your estimate should be at least practically feasible.

Uses of statistics Statistical methods can be fruitfully applied to any problem of decision making where numerical data are available or can be made available. .

industry and economics. internal and external trades. preparation of price policies of new products. preparation of budgets. the statistical techniques are applicable to problems like maintenance of trends of population. computation of consumer price indices from time to time to revise the wage structures. production of agricultural and non-agricultural industries. prices. quality control etc. gross national product. . taxation laws and rates. scheduling of the projects.Therefore. in business.

Functions of statistics The science of statistics is used to perform the following functions: Statistics help in developing sound methods of collecting data so that the data collected can be used to draw the valid inference regarding the desired objectives. It presents the information in numerical form. .

The data regarding a characteristic for a series of past periods can be used to forecast its value for a future period. . It can be used to study the relationship between two or more factors.It helps in simplifying the complex data by way of classification / tabulation/ graphical representation.

It is used to draw conclusions regarding a group of units rather than single unit. Qualitative data cannot be studied with the help of statistics.Limitations of statistics. . It is very powerful science to study quantitative data.

. primary sources and secondary sources. A source of data is primary for one who creates such a source by collecting the data through direct investigation and the same source of data becomes secondary to anyone else who makes use of it.SOURCES OF DATA. The sources of data can be classified into two broad categories viz.

.SOURCES OF DATA. periodicals etc. news papers. The primary data are to be collected through personal investigation by asking questions where as the secondary data are the published reports in journals.

. until you publish.Primary Data you collect the data yourself using methods such as interviews and questionnaires. no one else has access to it. The key point here is that the data you collect is unique to you and your research and.

There are many methods of collecting primary data and the main methods include: questionnaires interviews focus group interviews observation case-studies diaries critical incidents portfolios. .

So interpreting data just means working out what information is telling you. chart or graph. It is important to read all the different parts of the table.What is 'interpreting data'? Data means information. Information is sometimes shown in tables. charts and graphs to make the information easier to read. .

etc. Chronological on the basis of time. Quantitative in terms of Magnitudes . e. districts. Qualitative according to some attributes.PRESENTATION OF DATA Classification of Data Geographical area-wise. cities.g.

allows the comparisons & drawing of inferences . eliminating unnecessary details 2. brings out clearly the point of similarity 3.classification Classification is the process of arranging things in groups or classes according to their resemblance and affinities. It serves the following purposes 1.

The characteristic of a population may be broadly divided into two categories variables (quantitative) & attributes (qualitative) ..Cont.

etc. Sex. Attributes – not capable of being described numerically eg. color of eye.. . groups are differentiated either by the absence or presence of the attribute or by its differing qualiites. When classified on the basis of attribute.Cont. nationality.

export etc. turnover. age. Height. weight. Variables. .numerically described Eg.Cont...

Quantitative data The data which assumes numerical values are called quantitative data. Qualitative data

The data representing class to which a unit

belongs with respect to a qualitative character (reli 뉧

**For example, Consider the
**

1.Their

**following for a sample of ten students chosen from a class of hundred students.
**

ages in completed years are 17,19,18,19,21,20,18,18,19,20. 2. the sample included boys and girls in the following order: B G B B B G B G B. The age values in (1) are quantitative in nature. Whereas sex codes B,G in case (2) represent qualitative data.

Variables

May be Continuous or Discrete

Nominal &Ordinal .3.2.6. Examples 1. Discrete data If the data values are integer in nature. such data values are called discrete.5.Discrete and Continuous Data.4.

rainfall records always lead to continuous data Interval or ratio . weight. If the data values are real in nature (any numerical with in a certain range). 17.6. Variables like age.5. height.8.16. Examples 12. 13.7 . such data values are called continuous.Continuous Data. 14.1.

Data types Qualitative / categorical discrete Quantitative/ Numerical Discrete/ continuous Nominal Ordinal Interval Ratio .

. Eg. No order implied in the groups Eg. Ordinal is essentially same as nominal except there is now an order within the groups into which data is classified. Pass or Fail. Yes or No.Nominal &Ordinal Can be classified into categories or groups and labels to describe them. We can say 5 star is better than 4 star but not by howmuch . metropolitan. Ratings of hotels. semi-urban etc…. restaurants. and movies etc. urban.

longitude. Height . life. price. time. revenue etc…. However zero pt does not mean absence of something.Interval &Ratio Can be measured on a numerical scale. but here zero pt does mean the absence of what is being measured. Temperature. weight. sales. latitude etc… Ratio-can be measured on numerical scale. Eg. .

Array – arranging the values by ascending or descending order .Organizing the quantitative data First step Arranging the collected data to prepare an array.

This method produces a frequency distribution.Arranging Data Second step Organize data into similar categories or classes and then count the number of observations that falls into each category . .

The frequency distribution A frequency distribution is a table that organizes data into classes. . into groups of values describing one characteristic of the data. that is. A frequency distribution shows the number of observations from the data set that fall into each of the classes.

like this: As you can see. using groups of five makes it easier to see the total! .Interpreting data Tally marks and frequency tables Tallying is a way of counting that uses groups of five.

.•Frequency tables show the totals of the tally marks.

To do this. we first need to decide on our classes. we will usually need to group the data.Grouping data When there are a large number of possible outcomes. .

Cont… Decide on the type and number of classes for dividing the data. by quantitative or qualitative measure The range must be divided by equal classes The width of the interval from the beginning of one class to the beginning of the next class must be the same for every class. .

Width of a class interval width of the class intervals = next unit value after largest value in data .smallest value in data total number of class intervals .

Step 2 &3 Sort the data points into classes and count the number of points in each class Illustrate the data in a chart. .

Class intervals Class limits The lowest an the highest value that can be included. 20- 30 Class intervals The difference between upper and lower limit. . Class frequency The number of observations corresponding to the particular class Class mid point Value lying the half-way between lower & upper limit.

Exclusive & Inclusive method Upper limit of one class is the lower limit of the next class 20-30 30-40 etc. . Upper limit of one class is included in that class itself 20-29 30-39 etc.

322 log N Where k= the approximate number of classes N= total number of observation Whenever possible all classes should be of the same size.General rules The number of classes should preferably be between 5 & 15 K= 1 + 3. If not possible form open end classes .

so you might draw a tally chart similar to the one below: .Example Imagine that you are carrying out a survey to determine the number of CDs bought by your classmates in the past year. The possible answers are likely to range from 0 to 50 (about one a week!).

Number of CDs 0.34 35 .39 40 .24 25 .14 15 .44 45 .19 20 .29 30 .49 more than 49 Frequency 8 5 7 4 1 1 2 .4 5-9 10 .

Parts of a table Table number Title of the table Caption Stub Body of the table Head note Foot note .Tables A table is a systematic arrangement of statistical data in columns and rows.

Table………. Row headings Head notes …. It explains what the column represents Stub …. Caption …. . Brief explanatory statement Placed below the title enclosed in brackets. Column headings.

Bar charts Bar charts are one way of showing the information from a frequency table .

.

Types of bar Diagrams Simple bar diagrams Subdivided bar diagrams Multiple bar diagrams Percentage bar diagrams Deviation bars Broken bars .

Simple bar diagrams Only one variable. Funds flow in Rs. (crores) of ABC ltd. 2003-04 2002-03 years 2001-02 2000-01 1999-00 0 50 100 150 200 250 Funds Flow .

8 484.3 686. (crores) 2000 1000 0 Series3 Series2 Series1 1999-00 2000-01 2001-02 2002-03 2003-04 283. 3000 Rs.8 1067.7 301.4 416.4 365.6 303.8 402.8 668.4 Series3 Series2 Series1 .6 992.8 365.Sub divided bar diagrams distribution of Assistance sanctioned.2 years 536.8 473.3 233.

Multiple bar diagrams Corporate secotr profits 1800 1600 1400 1200 1000 800 600 400 200 0 2002-03 1663 1376 1219 846 982 589 gross profits profit beofre tax profit after tax retained profits 1 2003-04 .

Percentage bar diagrams Sales & Net Profits 61% 14% 29% 11% 1 2 17% 3 -74% sales netprofits .

where each segment represents a fraction of the total amount. .Pie charts Pie charts are circles divided into segments.

.

where each segment represents a fraction of the total amount.Pie charts Pie charts are circles divided into segments. .

The segment for Mountain bikes is one half of the chart.Pie charts… This pie chart shows the 20 bikes sold at the bike shop. . which is exactly half the number of bikes sold in total (20 bikes). This is because 10 Mountain bikes were sold.

.Histograms A histogram is a series of rectangles. If the classes are of equal width. each proportional in width to the range of values within a class and proportional in height to the number of items falling in the class. then the vertical bars in the histogram are also of equal width.

. the area is the important thing. In a histogram. all of the bars are the same width and the only thing that matters is the height of the bar. In a bar chart.Histograms are similar to bar charts apart from the consideration of areas.

Example of a Histogram .

3 5 2 .Histogram Count 5 Frequency Relative Frequency Percent 4 3 2 1 0 0 15 25 35 45 55 Lower Boundary Bars Touch Class 15 but < 25 25 but < 35 35 but < 45 Freq.

Height (feet): (Number of pupils) : 0-2 0 2-4 1 4-5 4 5-6 8 6-8 2 . It plots the relative frequency of the heights of some students based on the Frequency: data below.Example The next slide contains a real world example of a histogram.

uk/page5.Real World Example This Histogram is courtesy of http://www.co.gcsemaths.fsnet.html .

Plot each frequency by drawing a dot above its midpoint and Connect the successive dots with straight lines to form a polygon. .Frequency polygons To construct a frequency polygon Mark the frequencies on the vertical axis and the values of the variable on the horizontal axis.

Add two new classes containing zero observations.Cont.. . Allow the polygon to reach the horizontal axis at both end of the distribution.

3 5 2 .Polygon Count 5 Frequency Relative Frequency Percent 4 3 2 1 0 0 10 20 30 40 50 60 Midpoint Fictitious Class Class 15 but < 25 25 but < 35 35 but < 45 Freq.

Relative frequency polygon A frequency polygon that uses the relative frequency of data points in each of the classes is called a relative frequency polygon. .

.Ogives A graph of a cumulative frequency distribution is called an ogive A cumulative less-than ogive & A cumulative greater-than ogive.

Cumulative % 100% 75% 50% 25% 0% 0 Cumulative % Polygon (Ogive) Fictitious Class Class 15 but < 25 25 but < 35 35 but < 45 45 but < 55 Cum. % 0% 30% 80% 100% 15 25 35 45 55 Lower Boundary .

Errors in Presenting Data 1. Using ‘Chart Junk’ No Relative Basis in Comparing Data Batches Compressing the Vertical Axis No Zero Point on the Vertical Axis 3. 2. 4. .

‘Chart Junk’ Bad Presentation Minimum Wage 1960: $1.00 1970: $1.80 4 2 0 1960 1970 1980 1990 Good Presentation Minimum Wage $ .60 1980: $3.10 1990: $3.

No Relative Basis Bad Presentation 300 200 100 0 FR SO JR SR Good Presentation 30% 20% 10% 0% FR SO JR SR Freq. A’s by Class % A’s by Class .

Compressing Vertical Axis Bad Presentation 200 100 0 Q1 Q2 Q3 Q4 Good Presentation 50 25 0 Q1 Q2 Q3 Q4 $ Quarterly Sales $ Quarterly Sales .

No Zero Point on Vertical Axis Bad Presentation 45 42 39 36 J M M J S N $ Monthly Sales 60 40 20 0 Good Presentation $ Monthly Sales J M M J S N .

THANK YOU .

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