Introduction

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 Learning Objectives

In this chapter you learn:

 How business uses statistics

 The basic vocabulary of statistics

 How to use Microsoft Excel with this book

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 Why Learn Statistics

Make better sense of the world Make better business decisions

 Internet articles / reports  Business memos

 Magazine articles  Business research

 Newspaper articles  Technical journals

 Television & radio reports  Technical reports

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 In Business, Statistics Has
Many Important Uses
 To summarize business data

 To draw conclusions from business data

 To make reliable forecasts about business

activities

 To improve business processes

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 Two Different Branches Of
Statistics Are Used In Business
Statistics
The branch of mathematics that transforms data into
useful information for decision makers.

Descriptive Statistics Inferential Statistics

Collecting, summarizing, Using data collected from a

presenting and analyzing small group to draw
data conclusions about a larger
group

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 These Two Branches Are Used
In The Important Activities
 To summarize business data
 Descriptive methods used to create charts & tables
 To draw conclusions from business data
 Inferential methods used to reach conclusions about
a large group based on data from a smaller group
 To make reliable forecasts about business
activities
 Inferential methods used to develop, quantify, and
improve the accuracy of predictive models
 To improve business processes
 Involves managerial approaches like Six Sigma
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 Descriptive Statistics

 Collect data
 e.g., Survey
 Present
data
 e.g., Tables
and graphs
 Characteriz
e data
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 Inferential Statistics
 Estimation
 e.g., Estimate the population
mean weight using the
sample mean weight
 Hypothesis testing
 e.g., Test the claim that the
population mean weight is
120 pounds

Drawing conclusions about a large group of

individuals based on a smaller group.

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 Basic Vocabulary of Statistics

VARIABLES
Variables are a characteristics of an item or individual and are what you
analyze when you use a statistical method.

DATA
Data are the different values associated with a variable.

OPERATIONAL DEFINITIONS
Data values are meaningless unless their variables have operational
definitions, universally accepted meanings that are clear to all
associated
with an analysis.

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 Basic Vocabulary of Statistics
POPULATION
A population consists of all the items or individuals about
which you want to draw a conclusion. The population is the
“large group”

SAMPLE
A sample is the portion of a population selected for analysis.
The
sample is the “small group”

PARAMETER
A parameter is a numerical measure that describes a
characteristic of a population.

STATISTIC
A statistic is a numerical measure that describes a characteristic
of aEducation
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 Population vs. Sample

Population Sample

Measures used to describe the Measures used to describe

population are called the sample are called
parameters statistics
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 Chapter Summary
In this chapter, we have

 Introduced the basic vocabulary of statistics and

the role of statistics in turning data into
information to facilitate decision making
 Examined the use of statistics to:
 Summarize data
 Draw conclusions from data
 Make reliable forecasts
 Improve business processes
 Examined descriptive vs. inferential statistics

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 A Step by Step Process For Examining &
Concluding From Data Is Helpful
In this book we will use DCOVA
 Define the variables for which you want to reach
conclusions
 Collect the data from appropriate sources
 Organize the data collected by developing
tables
 Visualize the data by developing charts
 Analyze the data by examining the appropriate
tables and charts (and in later chapters by using
other statistical methods) to reach conclusions
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 Types of Variables
DCOVA
 Categorical (qualitative) variables have values that
can only be placed into categories, such as “yes” and
“no.”

 Numerical (quantitative) variables have values that

represent quantities.
 Discrete variables arise from a counting process
 Continuous variables arise from a measuring process

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 Types of Variables
DCOV
A
Variables

Categorical Numerical

Examples:
 Marital Status
 Political Party Discrete Continuous
 Eye Color
(Defined categories) Examples: Examples:
 Number of Children  Weight
 Defects per
 Voltage
hour (Counted (Measured characteristics)
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 Sources of Data
DCOVA
 Primary Sources: The data collector is the one using the
data for analysis
 Data from a political survey
 Data collected from an experiment
 Observed data
 Secondary Sources: The person performing data analysis is
not the data collector
 Analyzing census data
 Examining data from print journals or data published on the internet.

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 Sources of data fall into four
categories
DCOV
A
 Data distributed by an organization or an
individual

 A designed experiment

 A survey

 An observational study

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 Organizing Numerical Data:
Frequency Distribution Example
DCOVA
 Sort raw data in ascending order:
12, 13, 17, 21, 24, 24, 26, 27, 27, 30, 32, 35, 37, 38, 41, 43, 44, 46, 53,
58
 Find range: 58 - 12 = 46
 Select number of classes: 5 (usually between 5 and 15)
 Compute class interval (width): 10 (46/5 then round up)
 Determine class boundaries (limits):
 Class 1: 10 to less than 20
 Class 2: 20 to less than 30
 Class 3: 30 to less than 40
 Class 4: 40 to less than 50
 Class 5: 50 to less than 60
 Compute class midpoints: 15, 25, 35, 45, 55
 Count observations & assign to classes
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 Organizing Numerical Data: Frequency
Distribution Example
DCOVA
Data in ordered array:
12, 13, 17, 21, 24, 24, 26, 27, 27, 30, 32, 35, 37, 38, 41, 43, 44, 46, 53, 58

Class Midpoints Frequency

10 but less than 20 15 3

20 but less than 30 25 6
30 but less than 40 35 5
40 but less than 50 45 4
50 but less than 60 55 2
Total 20

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 Organizing Numerical Data: Relative &
Percent Frequency Distribution Example
DCOVA
Data in ordered array:
12, 13, 17, 21, 24, 24, 26, 27, 27, 30, 32, 35, 37, 38, 41, 43, 44, 46, 53, 58

Class Frequency Relative

Percentage
Frequency
10 but less than 20 3 .15 15
20 but less than 30 6 .30 30
30 but less than 40 5 .25 25
40 but less than 50 4 .20 20
50 but less than 60 2 .10 10
Total 20 1.00 100

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 Organizing Numerical Data: Cumulative
Frequency Distribution Example
DCOVA
Data in ordered array:
12, 13, 17, 21, 24, 24, 26, 27, 27, 30, 32, 35, 37, 38, 41, 43, 44, 46, 53, 58

Cumulative Cumulative
Class Frequency Percentage
Frequency Percentage
10 but less than 20 3 15% 3 15%
20 but less than 30 6 30% 9 45%
30 but less than 40 5 25% 14 70%
40 but less than 50 4 20% 18 90%
50 but less than 60 2 10% 20 100%
Total 20 100 20 100%
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 Why Use a Frequency Distribution?
DCOVA

 It condenses the raw data into a more

useful form
 It allows for a quick visual interpretation of
the data
 It enables the determination of the major
characteristics of the data set including
where the data are concentrated /
clustered
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 Frequency Distributions:
Some Tips
DCOVA
 Different class boundaries may provide different pictures for
the same data (especially for smaller data sets)

 Shifts in data concentration may show up when different

class boundaries are chosen

 As the size of the data set increases, the impact of

alterations in the selection of class boundaries is greatly
reduced

 When comparing two or more groups with different sample

sizes, you must use either a relative frequency or a
percentage distribution
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 Visualizing Categorical Data:
The Bar Chart
DCOV
 In a bar chart, a bar shows each category, the length of
represents the amount, frequency or percentage of values falling A
which
into
a category which come from the summary table of the variable.
Banking Preference

Banking Preference? % Intern

ATM 16%
Automated or live 2%
et In person at
telephone
Drive-through service at 17% branch
branch
In person at branch 41% Drive-through service at branch
Internet 24%
Automated or live

telephone

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 Visualizing Categorical Data:
The Pie Chart
DCOVA
 The pie chart is a circle broken up into slices that represent
categories. The size of each slice of the pie varies according to the
percentage in each category.
Banking Preference

Banking Preference? %
16% AT
ATM 16% 24% M

Automated or live 2% 2% Automated or live

telephone telephone

Drive-through service at 17% Drive-through service at

branch 17% branch
In person at branch
In person at branch 41%
Internet 24%
Internet
41%

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 Visualizing Numerical Data:
The Histogram
DCOV
A
 A vertical bar chart of the data in a frequency distribution
is called a histogram.

 In a histogram there are no gaps between adjacent bars.

 The class boundaries (or class midpoints) are shown on

the
horizontal axis.

 The vertical axis is either frequency, relative frequency,

or
percentage.

 The height of the bars represent the frequency, relative

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 Visualizing Numerical Data:
The Histogram
DCOV
Relative
A
Class Frequency Percentage
Frequency

10 but less than 20 3 .15 15

20 but less than 30 6 .30 30
30 but less than 40 5 .25 25
40 but less than 50 4 .20 20 8
50 but less than 60 2 .10 10
Histogram: Age Of Students
Total 20 1.00 100
6

Frequency
4
(In a percentage
histogram the vertical
axis would be defined to 2
show the percentage of
observations per class)
0
5 15 25 35 45 55
More

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 Visualizing Numerical Data:
The Polygon
DCOV
A
 A percentage polygon is formed by having the midpoint of
each class represent the data in that class and then
connecting the sequence of midpoints at their respective
class percentages.

 The cumulative percentage polygon, or ogive, displays the

variable of interest along the X axis, and the cumulative
percentages along the Y axis.

 Useful when there are two or more groups to compare.

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 Visualizing Numerical Data:
The Frequency Polygon DCOV
A
Class
Class Midpoint Frequency
10 but less than 20 15 3
20 but less than 30 25 6
30 but less than 40 35 5 Frequency Polygon: Age Of
40 but less than 50 45 4 Students
50 but less than 60 55 2
7
6
Frequency

5
4
3
2
(In a percentage 1
polygon the vertical axis 0
would be defined to 5 15 25 35 55 65
show the percentage of 45
observations per class) Class Midpoints
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 Visualizing Numerical Data:
The Ogive (Cumulative % Polygon)
DCOV
Lower
class
% less
than lower A
Class boundary boundary
10 but less than 20 10 15
20 but less than 30 20 45
30 but less than 40 30 70
40 but less than 50 40 90
50 but less than 60 50 100 Ogive: Age Of
Students
C u m u l a t i v e P e r c e n t ag e
10
0
80
60
(In an ogive the percentage 40
of the observations less 20
than each lower class
boundary are plotted
0 10 20 40 50
versus the lower class 30 Lower Class60
Boundary
boundaries.
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 Visualizing Two Numerical
Variables: The Scatter Plot
DCOVA
 Scatter plots are used for numerical data consisting of
paired observations taken from two numerical variables

 One variable is measured on the vertical axis and the

other variable is measured on the horizontal axis

 Scatter plots are used to examine possible

relationships between two numerical variables

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 Scatter Plot Example
DCOV
A
Volume Cost per
per day day Cost per Day vs. Production
Volume
23 125
26 140
250
Cost per Day

29 146
200
33 160
150
38 167
100
42 170
50
50 188
02 3 40 6 7
55 195 0 0 50 0 0
60 200 Volume per
Day
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