Business Statistic

Unit I
BBA SEM EST ER I
GAL GO TI AS U N I VERSITY
Learning Objectives
➢ Define statistics
➢ Become aware of a wide range of applications of statistics in business
➢ Differentiate between descriptive and inferential statistics
➢ Classify numbers by level of data and understand why doing so is important
 STATISTICS
➢ Statistics may be defined as a science of collection, presentation, analysis and
interpretation of numerical data. _ Croxton and Cowden
➢ Statistics is the science which deals with the methods of collecting, classifying,
presenting, comparing and interpreting numerical data collected to throw some light on
any sphere of enquiry. _ Seligman
➢ Statistical methods, broadly defined into the following two categories:
➢ Descriptive statistics: Statistical methods involving the collection, presentation, and
characterization of a set of data in order to describe the various features of that set of
data.
➢ In general, methods of descriptive statistics include graphic methods and numeric
measures.
➢ Inferential statistics: Statistical methods which facilitate estimating the characteristic
of a population or making decisions concerning a population on the basis of sample
results.
Characteristics and of
Importance Statistics
➢ Statistics are numerically expressed.
➢ It has an aggregate of facts
➢ Data are collected in systematic order
➢ It should be comparable to each other
➢ Data are collected for a planned purpose
➢ Importance:
➢ Statistics helps in gathering information about the appropriate quantitative data
➢ It depicts the complex data in graphical form, tabular form and in diagrammatic representation to
understand it easily
➢ It provides the exact description and a better understanding
➢ It helps in designing the effective and proper planning of the statistical inquiry in any field
➢ It gives valid inferences with the reliability measures about the population parameters from the
sample data
➢ It helps to understand the variability pattern through quantitative observations
 Statistics in Business
➢ Economics: regional, national, and international economic performance
i. Time-series analysis
ii. Demand analysis
iii. Forecasting techniques
➢ Finance: investments and portfolio management, analysis of profit and dividend helps to
predict and decide profit and dividend analysis helps available dividends for future years.
➢ Market: analyse data on population, purchasing power, habits of the consumers,
competitors, pricing, and a hoard of other aspects.
➢ Production: to improve the quality of the existing products and set quality control
standards for new ones.
➢ Personnel: studies of wage rates, incentive plans, cost of living, labour turnover rates,
employment trends, accident rates, performance appraisal, and training and development
programmes.
➢ Statistics in Physical Sciences, Social Sciences, Medical Sciences, etc.
Concepts
➢ Process: A process is a set of conditions that repeatedly come together to
transform inputs into outcomes.
➢ Population: A population (or universe) is a group of elements or observations
relating to a phenomenon under study for which greater knowledge and
understanding is needed.
• A population can be finite or infinite according to the number of observations
under statistical investigation.
• A descriptive measure of population is called a parameter. e.g. Population mean,
population variance, population standard deviation.
➢ Sample: A sample is a group of some, but not all, of the elements or observations
of a population or process.
• A descriptive measure of a sample is called a statistic. e.g. Sample mean, sample
variance, sample standard deviation.
Limitations of Statistics
➢ Statistics does not study qualitative Phenomena: Since statistics deals
with numerical data, it cannot be applied in studying those problems which can
be stated and expressed quantitatively.
➢ Statistics does not study individuals: This statement implies that a single
or isolated figure cannot be considered as statistics, unless it is part of the
aggregate of facts relating to any particular field of enquiry.
➢ Statistics can be misused: For proper use of statistics one should have
enough skill and experience to draw accurate and sensible conclusions.
 What is Data?
➢ Data: Data are individual pieces of factual information recorded and used for the purpose of
analysis.
➢ It is the raw information from which statistics are created. Statistics are the results of data
analysis - its interpretation and presentation.
➢ Need of Data
▪ Statistical data are the basic material needed to make an effective decision in a particular
situation. The main reasons are
i. To provide necessary inputs to a situation under study.
ii. To measure performance in an ongoing process such as production, service, etc.
iii. To enhance the quality of decision-making by enumerating alternative courses of action.
iv. To satisfy the desire to understand an unknown phenomenon.
v. To assist in guessing the causes and probable effects of certain characteristics in given
situations.
 Types of data
➢ Categorical: Represents the qualitative aspects of individuals.
➢ Numerical: Represents the quantitative values of individuals.
i. Discrete: which can only take certain fixed integer numerical values
ii. Continuous: which can take any numerical value.
• Discrete data are numerical measurements that arise from a process of counting,
while continuous data are numerical measurements that arise from a process of
measuring.
 MEASUREMENT
Measurement refers to the assignment of numbers in
a meaningful way, and understanding measurement
scales is important to interpreting the numbers
assigned to people, objects, and events.
➢ Principles of measurement
i. Numbers are ordered.
ii. The difference between numbers is ordered.
iii. The number series has a unique origin indicated
by the number zero.
➢ Classification of measurement scale
 CLASSIFICATION OF DATA
Classification of data is the process of arranging data in groups/classes on the
basis of certain properties.
➢ Purpose of Classification:
i. It condenses the raw data into a form suitable for statistical analysis.
ii. It removes complexities and highlights the features of the data.
iii. It facilitates comparisons and in drawing inferences from the data.
iv. It provides information about the mutual relationships among elements of a
data set.
v. It helps in statistical analysis by separating elements of the data set into
homogeneous groups.
 Requisites of Ideal Classification
The classification of data is decided after taking into consideration the nature,
scope, and purpose of the investigation.
➢ It should be unambiguous: There must be only one class for each element of the
data set.
➢Classes should be exhaustive and mutually exclusive:
i. Each element of the data set must belong to a class.
ii. Each class should be mutually exclusive so that each element must belong to
only one class.
➢It should be stable: The classification must be done in such a manner that if each
time an investigation is conducted, it remains unchanged.
➢It should be flexible: A classification should be flexible so that suitable
adjustments can be made in new situations and circumstances.
 Basis of Classification
➢Geographical Classification: Data are classified on the basis of geographical or
locational differences
➢Chronological Classification: Data are classified on the basis of time.
➢Qualitative Classification: Data are classified on the basis of descriptive
characteristics or on the basis of attributes.
i. Simple classification
ii. Manifold classification
➢Quantitative Classification: Data are classified on the basis of some
characteristics which can be measured, such as height, weight, income,
expenditure, production, or sales.
i. Continuous variable
ii. Discrete (also called discontinuous) variable
Collection of Data-Primary or
Secondary
➢ Primary data are those which are collected for the first time and are thus
original in character.
➢Secondary data are those which have already been collected by some other
persons and which have passed through the statistical machine at least once.
➢Primary data are in the shape of raw materials to which statistical methods are
applied for the purpose of analysis and interpretation.
➢Secondary data are usually in the shape of finished products since they have
been treated statistically in some form or the other.
➢ After statistical treatment the primary data lose their original shape and
become secondary data
Collection of Data-Primary or
Secondary
Data which are secondary in the hands of one may be primary for others.
Example: Statistics of agricultural production are secondary data for the
Agriculture Department of a Government but for the purpose of calculation of
national income these data are primary, because they will have to go through
further analysis and their shape will not remain the same
Factor affecting choice of method
for Data collection
Nature, object and scope of the enquiry are the most important things on
which the selection of the method depends.
The method selected should be such that it suits the type of enquiry that is
being conducted.
Availability of finance: When financial resources at the disposal of the
investigator are scantly, he shall have to leave aside expensive methods even
though they are better than others, which are comparatively cheap.
Availability of time: Some methods involve a long duration of enquiry, while
with others the enquiry can be conducted in a comparatively shorter duration.
The time at the disposal of the investigator thus affects the selection of the
technique by which data are to be collected.
METHODS OF COLLECTING
PRIMARY DATA
➢Direct personal investigation.
➢Indirect oral investigation.
➢Local reports.
➢Schedules and questionnaires.
❖Nature and properties of investigator:
➢The investigator has a keen sense of observation and is very polite and
courteous.
➢He should further acquaint himself with local conditions, customs and
traditions so that he can identify himself fully with the persons from whom the
information is sought.
The wording and design of
questions
➢Open Ended Versus Closed Questions:
➢Positively and Negatively Worded Questions:
➢Double-Barreled Questions:
➢Ambigious Questions:
➢Level of Wording:
➢Biased and Leading Questions:
❖The structure of the questionnaire: A questionnaire may be structured in different ways
but typically the following components are included:
➢Introductory Statement:
➢Demographic Questions:
➢Factual Questions:
➢Closing Statements and Return Instructions:
 Secondary Data Sources
➢Government publications:
i. The National Accounts Statistics, published by the Central Statistical Organization (CSO).
ii. Wholesale Price Index, published by the office of the Economic Advisor, Ministry of Commerce and Industry
iii. Consumer Price Index;
iv. Reserve Bank of India bulletins;
v. Economic Survey.
➢Non-Government publications:
i. The Indian Cotton Mills Association
ii. The various Chambers of Commerce
iii. The Bombay Stock Exchange
➢International organizations
i. The International Labour Organization (ILO)
ii. The Organization for Economic Cooperation and Development (OECD)
iii. The International Monetary Fund (IMF)
DATA ARRAY
The best way to examine a large set of numerical data is first to organize and present it in an
appropriate tabular and graphical format.

Arranged data in ordered form

Advantages and Disadvantages of
Ordered Array
➢Advantages
i. It provides a quick look at the highest and lowest observations in the data
within which individual values vary.
ii. It helps in dividing the data into various sections or parts.
iii. It enables us to know the degree of concentration around a particular
observation.
iv. It helps to identify whether any values appear more than once in the array.
➢Disadvantages
i. It neither summarizes nor organizes the data to present them in a more
meaningful way.
ii. It also fails to highlight the salient characteristics of the data, which may be
crucial in terms of their relevance to decision-making.
iii. The above task cannot be accomplished unless the observations are
appropriately condensed.
Tabulation
Tabulation is a method of presenting numeric data in rows and columns in a logical
and systematic manner to aid comparison and statistical analysis.
Definition: The logical listing of related quantitative data in vertical columns and
horizontal rows of numbers with sufficient explanatory and qualifying words,
phrases and statements in the form of titles, headings and explanatory notes to
make clear the full meaning, context and origin of data.
➢Objectives of Tabulation
➢For the Purpose of Data Simplification
➢To Draw Attention to Important Information
➢To Make Comparisons Easier
➢To Assist with Data Statistical Analysis
➢Conserves space
Components
of Table
➢Table Number
➢Title and subtitle
➢Captions or Column
Headings
➢Stubs or Row Headings
➢Body of Table
➢Source Note
➢Footnotes
Frequency Distribution
➢Frequency: Frequency refers to the number of times each variable gets repeated.
➢For example there are 50 students having weight of 60 kgs. Here 50 students is the
frequency.
➢Frequency Distribution: A frequency distribution is a convenient way of
presenting a large mass of data in tabular form by grouping the data.
➢A frequency distribution describes the number of observations for each possible
value of a variable.
 Advantages and Disadvantages of
Frequency Distribution
➢Advantages
i. The data are expressed in a more compact form. One can get a deeper insight
into the salient characteristics of the data at the very first glance.
ii. One can quickly note the pattern of distribution of observations falling in
various classes.
iii. It permits the use of more complex statistical techniques which help reveal
certain other obscure and hidden characteristics of the data.
➢Disadvantages
i. In the process of grouping, individual observations lose their identity. It becomes
difficult to notice how the observations contained in each class are distributed.
ii. A serious limitation inherent in this kind of grouping is that there will be too
much clustering of observations in various classes in case the number of classes
is too small.
Example: For the given data, use Tally method to construct frequency distribution
Frequency
distribution
using Tally
The frequency distribution of the
number of hours of overtime given
in Table 2.2 is shown in Table 2.4.
 Grouped Frequency Distributions
➢In group frequency distribution the data is classified in different classes.
➢Lower Class Limit (LCL) is the smallest data value that can be included in the
class.
➢Upper Class Limit (UCL) is the largest data value that can be included in the
class.
➢Class Width is the difference between UCL and LCL and is found by UCL –LCL
➢How to Decide Classes:
i. There should be between 5 and 20 classes.
ii. The classes must be mutually exclusive (non-overlapping values)
iii. The classes must be continuous (no gaps, even if the frequency is 0)
iv. The classes must be exhaustive (use all the data)
v. The classes must be equal in width
Example
Graphical Representation of
Data
* Bar Graph
➢Bar graph uses bars separated by an arbitrary
amount of space to represent how often elements
within a category occur.
➢The higher the bar, the higher the frequency of
occurrence. The underlying measurement scale is
discrete, not continuous.
➢Example: Construct a bar graph for the number of
persons with AIDS per 100,000 population for
selected metropolitan areas of July 1990.
Multiple
Bar Graph
Multiple bar graph is used
when we want to compare
the data of various series.
Pie Charts
➢A pie chart is especially useful in displaying a relative frequency (percentage)
distribution.
➢A circle is divided proportionally to the relative frequency (percentage) and
portions of the circle are allocated for the different groups.

Class Frequency
Size of angle =  360
Sum of all the Observations
Histogram
A histogram is a series of
rectangles, 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.
Frequency
Polygon
In a frequency polygon a
point is located above the
midpoint of each histogram
block to represent the
frequency in that class.
These points are then joined
by straight lines.
Ogives
➢The word Ogive is used in architecture to describe curves or curved shapes.
➢An ogive is a graphic presentation of a cumulative frequency distribution.
Therefore, it is also known as cumulative frequency curves.
➢Example: Construct the more than cumulative frequency table and draw the
Ogive for the below-given data.
Cumulative frequency table and Ogive
Exercise
For the following frequency distribution, draw
1. Histogram
2. Frequency Polygon

Tuberculin Reaction mm Frequency

8-10 24
10-12 52
12-14 42
14-16 48
16-18 12
18-20 8
20-22 14
22-24 6