# Role of Mathematics & Stats in Business Decision Making

Chap 1-1

Learning Objectives
In this chapter, you will learn:
 How statistics is used in business

 The sources of data used in business
 The types of data used in business  The basics of Microsoft Excel

Prof. Kuldeep Sharma IIBS, Bangalore

Chap 1-2

using information collected from samples  Make reliable forecasts about a business activity  Improve business processes Prof. Kuldeep Sharma IIBS. Bangalore Chap 1-3 .Why Study Statistics? Decision Makers Use Statistics To:  Present and describe business data and information properly  Draw conclusions about large populations.

Kuldeep Sharma IIBS. summarizing. Descriptive Statistics Collecting. Bangalore Chap 1-4 .Types of Statistics  Statistics  The branch of mathematics that transforms data into useful information for decision makers. and describing data Inferential Statistics Drawing conclusions and/or making decisions concerning a population based only on sample data Prof.

Survey  Present data  ex. Kuldeep Sharma IIBS. Bangalore Chap 1-5 . Tables and graphs  Characterize data X  ex. Sample mean = n i Prof.Descriptive Statistics  Collect data  ex.

Test the claim that the population mean weight is 120 pounds Drawing conclusions and/or making decisions concerning a population based on sample results. Kuldeep Sharma IIBS. Bangalore Chap 1-6 . Estimate the population mean weight using the sample mean weight  Hypothesis testing  ex. Prof.Inferential Statistics  Estimation  ex.

Kuldeep Sharma IIBS.Basic Vocabulary of Statistics VARIABLE A variable is a characteristic of an item or individual. universally accepted meanings that are clear to all associated with an analysis. Prof. Bangalore Chap 1-7 . DATA Data are the different values associated with a variable. OPERATIONAL DEFINITIONS Variable values are meaningless unless their variables have operational definitions.

Basic Vocabulary of Statistics POPULATION A population consists of all the items or individuals about which you want to draw a conclusion. Prof. Bangalore Chap 1-8 . STATISTIC A statistic is a numerical measure that describes a characteristic of a sample. SAMPLE A sample is the portion of a population selected for analysis. PARAMETER A parameter is a numerical measure that describes a characteristic of a population. Kuldeep Sharma IIBS.

Bangalore Measures computed from sample data are called statistics Chap 1-9 .Population vs. Kuldeep Sharma IIBS. Sample Population Sample Measures used to describe the population are called parameters Prof.

 An operations manager wants to monitor a manufacturing process to find out whether the quality of product being manufactured is conforming to company standards.  An auditor wants to review the financial transactions of a company in order to determine whether the company is in compliance with generally accepted accounting principles.Why Collect Data?  A marketing research analyst needs to assess the effectiveness of a new television advertisement. Bangalore Chap 1-10 . Kuldeep Sharma IIBS. Prof.  A pharmaceutical manufacturer needs to determine whether a new drug is more effective than those currently in use.

Prof. Bangalore Chap 1-11 . Kuldeep Sharma IIBS.Sources of Data  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.

Prof. Kuldeep Sharma IIBS.Types of Variables  Categorical (qualitative) variables have values that can only be placed into categories. Bangalore Chap 1-12 . such as “yes” and “no.”  Numerical (quantitative) variables have values that represent quantities.

Kuldeep Sharma IIBS.Types of Variables Data Categorical Examples:    Numerical Marital Status Political Party Eye Color (Defined categories) Discrete Examples:   Continuous Examples:   Number of Children Defects per hour (Counted items) Weight Voltage (Measured characteristics) Chap 1-13 Prof. Bangalore .

Levels of Measurement  A nominal scale classifies data into distinct categories in which no ranking is implied. Kuldeep Sharma IIBS. Bangalore Chap 1-14 . Categorical Variables Personal Computer Ownership Type of Stocks Owned Internet Provider Categories Yes / No Growth Value Other Microsoft Network / AOL Prof.

BBB. D. DD. Kuldeep Sharma IIBS. AA. Sophomore. B. Assistant Professor. CC. D Student Grades A. Neutral. CCC. Instructor AAA. Unsatisfied Professor. B. Junior. F Chap 1-15 Prof. Senior Satisfied. C. BB. C.Levels of Measurement  An ordinal scale classifies data into distinct categories in which ranking is implied Categorical Variable Student class designation Product satisfaction Faculty rank Standard & Poor’s bond ratings Ordered Categories Freshman. DDD. Bangalore . A. Associate Professor.

Kuldeep Sharma IIBS. Prof. Bangalore Chap 1-16 .Levels of Measurement  An interval scale is an ordered scale in which the difference between measurements is a meaningful quantity but the measurements do not have a true zero point.  A ratio scale is an ordered scale in which the difference between the measurements is a meaningful quantity and the measurements have a true zero point.

Bangalore Chap 1-17 .Interval and Ratio Scales Prof. Kuldeep Sharma IIBS.

Prof.Microsoft Excel Terms  When you use Microsoft Excel. you can use a cell range.  The intersections of the columns and rows of worksheets form boxes called cells. Bangalore Chap 1-18 . a collection of worksheets and other types of sheets.  Worksheets exist inside a workbook.  If you want to refer to a group of cells that forms a contiguous rectangular area. you place the data you have collected in worksheets. Kuldeep Sharma IIBS. including chart sheets that help visualize data.

 Allow the user to be able to explicitly see the chain of calculations from the starting data.Designing Effective Worksheets  You should associate column cell ranges with variables. Kuldeep Sharma IIBS. Bangalore Chap 1-19 . so column cell ranges will never contain any empty cells. Prof. the other for the printer.  Place all the variables on a worksheet that is separate from the worksheet containing the statistical results.  Create two copies of your worksheets: one optimized for the screen.  You do not skip any rows as you enter data.

Numerical data  Examined descriptive vs. Kuldeep Sharma IIBS.Chapter Summary In this chapter. inferential statistics  Reviewed data types and measurement levels  Discussed Microsoft Excel terms and tips Prof. Bangalore Chap 1-20 . we have  Reviewed why a manager needs to know statistics  Introduced key definitions:  Population vs. Sample  Primary vs. Secondary data types  Categorical vs.