QUAN201: Introduction to

Business Statistics

Presentation 1
 Lecture Topics

 Define Statistics
 Applications of Statistics in Business
 Difference between Descriptive and Inferential
statistics
 Some Basic Concepts
 Data Collection
 Data Presentation via Tables and Graphs
2
 What is Statistics?

 Facts and figures

 Branch of mathematics

 Science of gathering, analyzing, interpreting,

and presenting data.

3
 Application of Statistics in
Business
 Accounting — auditing and cost estimation
 Economics — regional, national, and international
economic performance
 Finance — investments and portfolio management
 Management — human resources, and quality management
 Management Information Systems — performance of
systems which gather, summarize, and disseminate
information to various managerial levels
 Marketing — market analysis and consumer research
 International Business — market and demographic analysis

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 Some Statistical Concepts

 Population vs. Sample

 Census
 Descriptive vs. Inferential Statistics
 Parameter vs. Statistic
 Variables, Data

5
 Population Versus Sample

 Population — the whole

 a collection of persons, objects, or items under study
 Sample — a portion of the whole
 a subset of the population
 Census — gathering data from the entire
population

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Population

7
Population and Census Data
Identifier Color

RD1 Red
RD2 Red
RD3 Red
RD4 Red
RD5 Red
BL1 Blue
BL2 Blue
GR1 Green
GR2 Green
GY1 Gray
GY2 Gray
GY3 Gray

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Sample and Sample Data
Identifier Color

RD2 Red

RD5 Red

GR1 Green

GY2 Gray

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Descriptive vs. Inferential Statistics

 Descriptive Statistics — using data gathered

on a group to describe or reach conclusions
about that same group only.

 Inferential Statistics — using sample data to

reach conclusions about the population from
which the sample was taken.

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 Descriptive Statistics

 Collect data
 e.g. Survey
 Present data
 e.g. Tables and graphs
 Characterize data
 e.g. Sample mean =
X i

n
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 Descriptive Statistics
 Descriptive statistics involves the arrangement,
summary, and presentation of data, to enable
meaningful interpretation, and to support decision
making.
 Descriptive statistics methods make use of
 graphical techniques

 numerical descriptive measures.

 The methods presented apply to both

 the entire population

 the population sample

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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 and/or making decisions
concerning a population based on sample results.
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 Parameter vs. Statistic

 Parameter — descriptive measure of the

population
 Usually represented by Greek letters

 Statistic — descriptive measure of a sample

 Usually represented by Roman letters

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Symbols for Population Parameters
 denotes population parameter mean


2
denotes population variance
 denotes population standard deviation

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Symbols for Sample Statistic

x denotes sample mean

S
2
denotes sample variance
S denotes sample standard deviation

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Process of Inferential Statistics
Calculate x
to estimate 
Population Sample
 x
(parameter) (statistic)

Select a
random sample
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 Definitions…
A variable is some characteristic of a population or
sample that is of interest for us.
E.g. student grades.
Typically denoted with a capital letter: X, Y, Z…

Data are the observed values of a variable.

E.g. student marks: {67, 74, 71, 83, 93, 55, 48}

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 Why We Need Data
 To provide input to survey
 To provide input to study
 To measure performance of service or production
process
 To evaluate conformance to standards
 To assist in formulating alternative courses of action
 To satisfy curiosity

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 Data Sources
Primary Secondary
Data Collection Data Compilation

Print or Electronic
Observation Survey

Experimentation

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 Types of Data
 Knowing the type of data is necessary to
properly select the technique to be used when
analyzing data.

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 Types of Data
D a ta

Categorical Num erical

(Q ualitative) (Q uantitative)

Discrete Continuous

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 Types of data - examples
Quantitative data Qualitative data

Age - income Person Marital status

55 75000 1 married
42 68000 2 single
. . 3 single
. .
. .
Weight gain .
Computer .
Brand
+10 1 IBM
+5 2 Dell
. 3 IBM
. . .
. . 23
 Data Presentation via Tables and
Graphs
 Organizing numerical/Quantitative data
 The ordered array and stem-leaf display

 Tabulating and graphing Univariate

numerical/quantitative data
 Frequency distributions: tables, histograms, polygons
 Cumulative distributions: tables, the Ogive

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 Data Presentation via Tables and
Graphs (continued..)
 Tabulating and graphing Univariate
categorical/qualitative data

 The frequency distribution table

 Bar and pie charts, the Pareto diagram

Graphing Bivariate numerical data

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 Organizing Numerical/Quantitative
Data
Numerical Data 41, 24, 32, 26, 27, 27, 30, 24, 38, 21

Frequency Distributions
Ordered Array
Cumulative Distributions
21, 24, 24, 26, 27, 27, 30, 32, 38, 41

Stem and Leaf 2 144677

Histograms Ogive
Display 3 028
4 1
Tables Polygons
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 Ungrouped Versus Grouped
Data

 Ungrouped data
• have not been summarized in any way
• are also called raw data
 Grouped data
• have been organized into a frequency
distribution

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Example of Ungrouped Data

42 26 32 34 57

30 58 37 50 30
Ages of a Sample of
53 40 30 47 49
Managers in the
50 40 32 31 40
United Arab Emirates
52 28 23 35 25

30 36 32 26 50

55 30 58 64 52

49 33 43 46 32

61 31 30 40 60

74 37 29 43 54

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 Frequency Distribution of Manager’s
Ages (An example of a grouped data)

Class Interval Frequency

20-under 30 6
30-under 40 18
40-under 50 11
50-under 60 11
60-under 70 3
70-under 80 1

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 How to Construct a Frequency
Distribution (or Tally) Table/Chart?
 Find range: (51)
 Select number of classes: (6)
 Compute class interval (width): (10)
 Determine class boundaries (limits):
(20,30,40,50,60,70,80)
 Count observations & assign to classes
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 Data Range
42 26 32 34 57 Range = Largest - Smallest
30 58 37 50 30

53 40 30 47 49
= 74 - 23
50 40 32 31 40 = 51
52 28 23 35 25

30 36 32 26 50

55 30 58 64 52 Smallest
49 33 43 46 32

61 31 30 40 60 Largest
74 37 29 43 54

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Number of Classes and Class Width
 The number of classes should be between 5 and 15.
• Fewer than 5 classes cause excessive summarization.
• More than 15 classes leave too much detail.
 Class Width
• Divide the range by the number of classes for an
approximate class width
• Round up to a convenient number

51
Approximate Class Width = = 8.5
6
Class Width = 10

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 Frequency Distribution of
Manager’s Ages

Class Interval Frequency

20-under 30 6
30-under 40 18
40-under 50 11
50-under 60 11
60-under 70 3
70-under 80 1

33
 Tally Chart of Manager’s
Ages

Class Interval Tallies

20-under 30 IIIII I
30-under 40 IIIII IIIII IIIII III
40-under 50 IIIII IIIII I
50-under 60 IIIII IIIII I
60-under 70 III
70-under 80 I

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Class Midpoints, Relative Frequencies,
and Cumulative Frequencies

beginning class endpoint + ending class endpoint

Class Midpoint =
2
30 + 40
=
2
= 35

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 Relative Frequency
Relative
Class Interval Frequency Frequency
20-under 30 6 .12
30-under 40 18 6 .36

40-under 50 11 50.22
50-under 60 11 .22
18

60-under 70 3 .06 50
70-under 80 1 .02
Total 50 1.00

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 Cumulative Frequency
Cumulative
Class Interval Frequency Frequency
20-under 30 66
30-under 40 18 24
40-under 50 11 18 + 6 35
50-under 60 11 11 + 24 46
60-under 70 3 49
70-under 80 150
Total 50

37
Class Midpoints, Relative Frequencies,
and Cumulative Frequencies

Relative Cumulative
Class Interval Frequency Midpoint Frequency Frequency
20-under 30 625 .12 6
30-under 40 18 35 .36 24
40-under 50 11 45 .22 35
50-under 60 11 55 .22 46
60-under 70 365 .06 49
70-under 80 175 .02 50
Total 50 1.00

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 Cumulative Relative Frequencies
Cumulative
RelativeCumulative Relative
Class Interval Frequency Frequency Frequency Frequency
20-under 30 6.12 6 .12
30-under 40 18 .36 24 .48
40-under 50 11 .22 35 .70
50-under 60 11 .22 46 .92
60-under 70 3.06 49 .98
70-under 80 1 .02 50 1.00
Total 50 1.00

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 Histogram

Class Interval

20
Frequency
20-under 30 6

Frequency
30-under 40 18

10
40-under 50 11
50-under 60 11
60-under 70 3
0

70-under 80 1 0 10 20 30 40 50 60 70 80
Years

40
 Histogram Construction

Class Interval Frequency

20-under 30 6

20
30-under 40 18
40-under 50 11
Frequency
10
50-under 60 11
60-under 70 3
70-under 80 1
0

0 10 20 30 40 50 60 70 80
Years

41
 Shapes of Histograms…
 Symmetry
 A histogram is said to be symmetric if, when we draw a vertical line down
the center of the histogram, the two sides are identical in shape and size:
Frequency

Frequency

Frequency
Variable Variable Variable

42
 Shapes of Histograms…
 Skewness
 A skewed histogram is one with a long tail extending to either
the right or the left:
Frequency

Frequency
Variable Variable

Positively Skewed Negatively Skewed

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 Shapes of Histograms…
 Bell Shape
 A special type of symmetric histogram is one
that is bell shaped:
Frequency

Many statistical techniques

require that the population be
bell shaped.
Variable

Drawing the histogram helps

verify the shape of the
population in question. Bell Shaped
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 Why do we need Histograms?
Suppose a manufacturer of cereal wants to
compare performance of his two plants
(whether these plants are producing 500 grams
of cereal accurately)
 He picks a sample of 100 cereal boxes from
each of his two plants and prepared separate
histograms. These histograms can provide
information about the accuracy of the working
of these plants.

45

Histogram Comparison…
Compare & contrast the following histograms based on
data from Example 2.6 & Example 2.7.
The two courses have very different
unimodal vs. bimodal histograms…

spread of the marks (narrower | wider)

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 Frequency Polygon

Class Interval Frequency

20
20-under 30 6
30-under 40 18

Frequency
40-under 50 11

10
50-under 60 11
60-under 70 3
70-under 80 1
0

0 10 20 30 40 50 60 70 80
Years

47
 Ogive
Cumulative

60
Class Interval Frequency
20-under 30 6

40
Frequency
30-under 40 24
40-under 50 35

20
50-under 60 46
60-under 70 49 0

70-under 80 50 0 10 20 30 40 50 60 70 80
Years

48
 Relative Frequency Ogive
Cumulative
Relative

Cumulative Relative Frequency

1.00
Class Interval Frequency 0.90
0.80
20-under 30 .12 0.70
30-under 40 .48 0.60
0.50
40-under 50 .70 0.40
0.30
50-under 60 .92 0.20
0.10
60-under 70 .98 0.00
70-under 80 1.00 0 10 20 30 40 50 60 70 80
Years

49
 Stem and Leaf Display

 This is a graphical technique most often used

in a preliminary analysis.

 Stem and leaf diagrams use the actual value of

the original observations
(whereas, the histogram does not).

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 Stem and Leaf Display

 Split each observation into two parts.

 There are several ways of doing that:
Observation:
42.19 42.19
Stem Leaf Stem Leaf
42 19 4 2

51
 Safety Examination Scores
for Plant Trainees
Raw Data Stem Leaf

86 77 91 60 55 2 3
76 92 47 88 67 3 9
4 79
23 59 72 75 83
5 569
77 68 82 97 89
6 07788
81 75 74 39 67
7 0245567789
79 83 70 78 91 8 11233689

68 49 56 94 81 9 11247

52
Construction of Stem and Leaf
Plot
Raw Data Stem Leaf

86 77 91 60 55 2 3
Stem 3 9
76 92 47 88 67

4 79
23 59 72 75 83
5 569
77 68 82 97 89
Leaf 6 07788
81 75 74 39 67
7 0245567789
Stem
79 83 70 78 91 8 11233689

68 49 Leaf
56 94 81 9 11247

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Graphical Techniques for Qualitative
data

 When the raw data can be naturally categorized in

a meaningful manner, we can display frequencies
by

 Pie chart – emphasize the proportion of occurrences of

each category.
 Bar charts – emphasize frequency of occurrences of
the different categories.

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 The Pie Chart

 The pie chart is a circle, subdivided into a

number of slices that represent the various
categories.

 The size of each slice is proportional to the

percentage corresponding to the category it
represents.

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 Second Quarter
U.S. Truck Production (Example 1)
17%
4%
1%

39%
39%

A B C D E

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Pie Chart Calculations for Company A

2d Quarter
Truck
Production
Company Proportion Degrees

A 357,411 .388 140

B 357, 411 354,936 .386 139

=
C 920,190 160,997 .175 63

D 34,099 .388 .037

360 = 13

E 12,747 .014 5
Totals 920,190 1.000 360

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 The Pie Chart
 Example 2
 The student placement office at a university wanted
to determine the general areas of employment of
last year school graduates.

 Data was collected, and the count of the

occurrences was recorded for each area.
 These counts were converted to proportions and the
results were presented as a pie chart and a bar chart.

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 Frequency and Relative Frequency
Distributions for Example 2
Area Frequency Relative Fre.
-----------------------------------------------------
Accounting 73 28.8%
Finance 52 20.6
General Management 36 14.2
Marketing/Sales 64 25.3
Other 28 11.1
----------------------------------------------------
Total 253 100

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The Pie Chart

Other (28.9 /100)(3600) = 1040

11.1% Accounting
28.9%
General
management
14.2%

Finance Marketing
20.6% 25.3%

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 The Bar Chart
 Rectangles represent each category.
 The height of the rectangle represents the frequency.
 The base of the rectangle is arbitrary

Bar Chart

80 73
70 64
60 52
F re qu e ncy

50
40 36
30
28
20
10
0
1 2 3 4 5 More
Area

61
 Graphing the Relationship Between Two
Quantitative Variables…

 To explore this relationship, we employ a scatter

diagram, which plots two variables against one
another.

 The independent variable is labeled X and is usually

placed on the horizontal axis, while the other,
dependent variable, Y, is mapped to the vertical
axis.
62
 Scatter Diagram…
 Example 2.9 A real estate agent wanted to know to
what extent the selling price of a home is related to
its size…

1) Collect the data 

2) Determine the independent variable (X = house size)
and the dependent variable (Y = selling price) 
3) Use Excel to create a “scatter diagram”…

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 Scatter Diagram…
 It appears that in fact there is a relationship, that
is, the greater the house size the greater the selling
price…

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 Patterns of Scatter Diagrams…
 Linearity and Direction are two concepts we are
interested in

Positive Linear Relationship Negative Linear Relationship

Weak or Non-Linear Relationship

65