BUSINESS STATISTICS( BUS 3308)

INTRODUCTION

Prof. Dr. Qazi Md. Galib Ahsan

School of Business
Bangladesh Open University.
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 DEVELOPMENT OF STATISTICS
The word “Statistics” seems to have been derived from
the Latin word “Status” or the Italian word “Statista.”
Both these words mean a “political state.” In the early
years “Statistics” connoted a collection of facts about the
state on the people in the state for administrative or
political purposes. Thus statistics originally was meant for
collection of facts useful for affaires of the state, like
taxes, land records, population ,demography, etc.
This branch of science came to be known as the science of
state, as it was mainly used by it. Thus the subject of
statistics developed as a kings subject or “as a science of
kings”.
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Before an attempt is made to define the subject,
it is necessary to point out that the term
statistics is used in two distinct senses. First, by
statistics we often mean numerical data relating
to any field of enquiry. Thus we speak of
“Statistics of prices.” “Statistics of exports”,
“Statistics of births and deaths.” and so on.
 Second, by Statistics we refer to the scientific
method by which we collect, elucidate, analyze
and interpret numerical data.
In the former sense the term is plural, which in
3 the1-50latter sense it is singular.
 DEFINITIONS OF STATISTICS
 “Statistics are the classified facts representing the conditions of the

people in the state…. specially those facts which can be stated in number

or in table of numbers or in any tabular or classified arrangement”. –

Webster
 According to Horace Secrits, “Statistics are aggregates of facts
affected to a marked extent by multiplicity of causes numerically
expressed, enumerated or estimated according to reasonable
standards of accuracy, collected in a systematic manner for a
predetermined purpose and placed in relation to each other.”
 The definition of statistics given by Horace Secrits is quite exhaustive and
on analyse, it makes clear that as numerical statements of facts, Statistics
should process the following characteristics:
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 (i) Statistics are concerned with “population” of facts rather
than with a single fact: A single age, height or sale does not
constitute statistics. A “set” “series” or “mass” of accidents,
sales, ages form statistics and they may be studied in relation to
time, place and number of occurances.
(ii) Statistics are affected to a marked extent by a
multiplicity of causes: Supposse, Cholera has broken out in an
area. The disease may have spread through a number of possible
sources, such as water, milk, vegetables etc. Production
statistics are affected by climate, soul, monsoon, fertility etc.
(iii) Statistics must be numerically expressed, enumerated or
estimated: Statistical methods apply only to date which are
capable of reducing to quantitative forms. Qualitative
expressions such as beauty, health intelligence are not statistics
unless a numerical equivalent is assigned to each expression.
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(iv) Statistics must be enumerated or estimated or
approximated according to reasonable standards of
accuracy: Reasonable standard of accuracy depend on the
purpose for which the statistics are being collected. No hard
and fast rule can be laid down for all cases. But one thing is
certain, i.e., personal bias and prejudices of the investigator
should not enter into the enumeration or estimation of
figures, otherwise conclusions from the figures would not
be accurate.
(v) Statistics should be collected in a systematic manner
for a predetermined purpose: The purpose of a series of
weights and heights of a particular class in a school may be
to find out whether the students having more weights are
taller or not. In the absence of a predetermined purpose, the
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data1-50will have to go to the waste paper basket.
Business Statistics and Their Uses

Examples of how business use statistics:

 Marketing Research
 Focus group data, customer surveys
 Advertising
 Household surveys, TV viewing habits
 Operations
 Quality control, reliability
 Finance and Economics
 Data on income, credit risk, unemployment
 Stages on Statistical Investigation
“Statistics include a number of methods for the
collection, organization, presentation, analysis and
interpretation of numerical data as a basis for the
analysis and comparison of the observed phenomena.”
According to this definition, there are five stages in a
statistical investigation.
(1) Collection of Data: It is necessary to avoid a bias in
the collection of the data. In some statistical enquiries
the data are collected by means of questionnaire. The
questionnaire should be framed in such a manner as to
reduce the danger of obtaining misleading answers to the
minimum. Instead of collecting the data himself the
8 investigator
1-50 may depend upon secondary data.
 (2) Organization of data: The first step in
organizing a mass of data is “editing.”
After the date have been edited, the next step is
to “classify” them.
The last step in organization is “tabulation.”
The classified data are arranged in columns and
rows so as to summarize the results obtained.

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 (3) Presentation of data: Data may be
presented in the form of (i) Statistical tables
and (ii) diagrams and graphs.

(4) Analysis: Measures of variation,

Correlation, regression etc.

(5) Interpretation: If this step is not

properly taken, the whole object of the
investigation may be lost and wrong
conclusions drawn. This interpretation
10 requires a high degree of skill, care judgment
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 DATA AND INFORMATION?
Data
Values assigned to observations or measurements

Information
Data that are transformed into useful facts that can be used for a
specific purpose, such as making a decision

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 Data
Data: Raw facts or measurements of sales

Table | Sales-Score Data

Date Score
13/6 94
20/6 96
27/6 93
10/7 89 Each individual value is
considered a data point
16/7 86
24/7 89

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 Information
Analyzing the data can provide information for
decision making
Table |Sales Score Data
Date Score
13/6 94
20/6 96
27/6 93 What will be the average sales
10/7 89 scores?
16/7 86
24/7 89

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 The Sources of Data
Primary data :
Data collected first time relating to a particular problem on any
area of knowledge. So the data collected for the first time by
the investigations as original data are known as Primary data.

Secondary data:
Secondary data is that kind of data, that are already
published for the purposes other than the problem under
study. So when as investigation is using data which have
been collected by someone else, then such data are known as
secondary data.

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 The Sources of Data
Primary data Secondary data

Advantages: Advantages:
• collected by the person or • Readily available
organization who uses the • Less expensive to collect
data

Disadvantages:
Disadvantages: • No control over how the
• Can be expensive and data was collected
time-consuming to gather • Less reliable unless
collected and recorded
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 Methods of Collecting Primary Data:
(1). Interview by enumerators with a prepared
schedule or questionnaire: Under the method the
enumerator is provided with a prepared questionnaire
and he puts the questions to be informant and records
the answers. The informant does not fill up the
schedule himself but the enumerator fills it up.
Obviously, this methods needs qualified and trained
enumerators. Much of the success under this scheme
depends upon the standardization of the questions and
the skill and tactfulness of the enumerators.

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 Methods of Collecting Primary Data:
(2) Schedules to be filled in by the informants themselves:
Under this method the questionnaires are sent to the individual
respondents through mail with a request to fill them up and
send them back to the supplier. Under this method framing the
questionnaire is very important. Questions included in the
questionnaire should be simple, easy and self-explanatory. The
nature of questions should be such that man with average
intelligence can easily answer them. Usually, the answers to
questions term to be “yes” or “no” type and possible
alternative answers are quoted in the schedule. This method of
collection suffers from a number of drawbacks. The success of
the method depends upon the efficient preparation of the
questionnaire as well as the responsiveness of the informants.
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 Methods of Collecting Primary Data:

(3) Direct observation by enumerators: Under this

method the enumerator is provided with a schedule
showing the information required and he goes to the
field of observation and records the required
information from his personal observation. He
directly observes the phenomena and records the
same. The method is relatively simple but the
reliability of the information collected depends upon
the sincerity and the diligence of the enumerator.

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 Methods of Collecting Primary Data:
(4) Direct personal observation: Under this
method the person interested in studying a
problem undertakes the task of personally
observing the phenomenon. In fact, the
investigation might himself get to the spot,
mix up with the people, may even live with
them and from such personal knowledge he
may take careful observations about the
condition of the people in all aspects or the
aspect in which the investigator is interested.
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 Methods of Collecting Primary Data:
(5) Indirect and Oral Investigation: This
method is used where information to be
collected are of complex type and a direct
approach for information may not produce the
desired result. The Investigator may have list of
questions and he interviews the persons well
informed of the phenomenon about which the
information is sought. Where the field of inquiry
is very vast, for example, a whole nation, a good
number of informed individuals may be called
upon to give their views on the problem.
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 Methods of Collecting Primary Data:
(6) Information through Local
Correspondents on Sources:
Sometimes Local correspondents are employed to
give the estimate of a particular phenomenon. They
provide their own estimates in their indigenous way
and these estimates from the basis of compilation.
This method is mostly employed in crop estimates.
This method has very little systematic basis and the
information obtained is also not very reliable.

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 Types of Variables
 Categorical (qualitative) Variables have values
that can only be placed into categories, such as
“yes” and “no.”

 Numerical (quantitative) Variables have values

that represent a counted or measured quantity.
 Discrete variables arise from a counting
process
 Continuous variables arise from a measuring
process
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 Types of Variables

Variables

Categorical Numerical
( Qualitative ) ( Quantitative )

Examples:
Discrete Continuous
 Marital Status
 Political Party
Examples: Examples:
 Eye Color
(Defined categories)  Number of  Weight
Children  Voltage
 Defects per hour (Measured
23 1-50 (Counted items) characteristics)
 Discrete vs. Continuous Data
Examples of Discrete data
Number of children per family
Number of cars listed per insurance policy
Vacation days per month

Examples of Continuous data

Time required to read chapter 2
Thickness of paint applied to a car body
Voltage of batteries produced in August

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 Classifying Data by Level of Measurement

Two Main Types of Data and their

Corresponding Levels

Types of Data

Qualitative Quantitative

Nominal Ordinal Interval Ratio

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 Nominal level G ender
Data that is
classified into
categories and
cannot be E ye
arranged in any Color
particular order.

Nominal data
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 Ordinal level: involves data arranged in some
order, but the differences between data values
cannot be determined or are meaningless.

During a taste test

of 4 soft drinks, 4
2
Coca Cola was
ranked number 1,
Dr. Pepper number 3
2, Pepsi number 3,
1
and Root Beer
number 4.

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Levels of Measurement
 Interval level
Similar to the ordinal level, with the additional
property that meaningful amounts of differences
between data values can be determined. There is
no natural zero point.

Temperature on
the Fahrenheit
scale.

28 Levels of Measurement
Ratio level: the interval level with an
inherent zero starting point. Differences and
ratios are meaningful for this level of
measurement.
M ont hly income
of surgeons

Levels of Measurement
 Levels of Measurement
A nominal scale classifies data into distinct categories
in which no ranking is implied.

Categorical Variables
Categories
Do you have a Yes, No
Facebook profile?
Growth, Value ,
Other
Type of investment
AT&T, Sprint,
Verizon, Other, None
Cellular Provider

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 Levels of Measurement (con’t.)
An ordinal scale classifies data into distinct categories
in which ranking is implied

Categorical Variable Ordered Categories

Student class designation Freshman,, Junior, Senior

Product satisfaction Very unsatisfied, Fairly unsatisfied,

Neutral, Fairly satisfied, Very
satisfied
Faculty rank Professor, Associate Professor,
Assistant Professor, Instructor
Standard & Poor’s bond ratings AAA, AA, A, BBB, BB, B, CCC, CC,
C, DDD, DD, D
Student Grades A, B, C, D, F

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 Interval and Ratio Scales

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 Statistical Procedures
Descriptive Statistics
Procedures and techniques designed to describe data.
Collecting, summarizing, and displaying data.
.

Inferential Statistics
Tools and techniques that help decision makers to draw
inferences from a set of data. Making claims or conclusions
about the data based on a sample

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 Descriptive Procedures
Charts and graphs

Numerical measures

x i
Sum of all data values
Average  
i 1

N Number of data values

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 Inferential Procedures
Estimation
e.g., Estimate the population
mean weight using the sample mean
weight
Hypothesis Testing
e.g., Use sample evidence to test the
claim that the population mean weight
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is 120 pounds
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 Time Series vs. Cross-Sectional Data

Time Series Data:

• Values that correspond to specific
measurements taken over a range of
time periods

Cross Section Data:

• Values collected from a number of
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subjects during a single time period
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 Time Series vs. Cross-Sectional Data
Table :| Unemployment Rate Data, 2008–2012
Unemployment Rate
Year USA % CA % DE % MI % TX %

2008 4.9 5.9 3.8 7.1 4.4 Cross-

Sectional
2009 7.6 10.1 6.7 11.6 6.4 Data

2010 9.7 12.3 8.8 13.7 8.2

2011 9.0 12.4 8.5 10.7 8.3

2012 8.3 10.9 7.0 9.0 7.3

Time Series Data

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 Time Series vs. Cross-Sectional Data

Figure - A Time Series Graph of

U.S. Unemployment Rates,
2008–2012

Figure -A Cross-Sectional Graph

of 2012 Unemployment Rates

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 Descriptive and Inferential Statistics

Descriptive statistics
Collecting, summarizing, and displaying
data

Inferential statistics
making claims or conclusions about the
data based on a sample

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 Population vs. Sample

Population
• represents all possible subjects that are of interest in a
particular study
Sample
• refers to a portion of the
population that is
representative of the
population from which
it was selected

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 Data Is Collected From Either A Population or A
Sample

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”

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 Parameter vs. Statistic
• Parameter – a described characteristic about a population
• Statistic – a described characteristic about a sample

Population Sample

Values calculated using Values computed from

population data are called sample data are called
parameters statistics
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