BUSINESS STATISTICS

Unit I: Descriptive Statistics

SCOPE, FUNCTIONS AND LIMITATIONS OF

STATISTICS

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 Statistics
Introduction
• Statistics is generally used to measure quantitative
aspects of data management but as a subject of study it
Introduction refers to body of principles and procedures developed for
collection, classification, summarization and meaningful
interpretation and for the use of such data.
•The discipline is useful in converting random data to
understandable information and aids in strategic business
decision making.

Statistics has its origin in Latin word Status, Italian

word Statista and German term Statistik all of which
Origin mean “Political State”. In ancient times the beginning of
Statistics was made to meet the requirements of State
primarily and hence the name.

The term Statistics is generally used in 2 senses-

Meaning 1.Plural Sense

2. Singular Sense
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 Statistics
Meaning-Plural
Under this, the Statistics refers to numerical statement of facts
related to any field of enquiry such as data related to income,
Plural sense expenditure, population etc
in the sense of numerical data or Statistical data.

Definitions- “Statistics are numerical statements of facts in any

department of enquiry placed in relation to each other”-Bowley
Definitions
for “By statistics we mean quantitative data affected to a marked extent by
Plural sense multiplicity of cause”- Yule and Kendall

1. Aggregation of facts- A single number does not constitute

Statistics as no conclusion can be drawn from it. Only the
aggregate of facts capable of offering meaningful
Features in
information constitute Statistics.
Plural 2. Numerically expressed- Statistics are expressed in
Sense numbers. Qualitative data like rich, poor, beautiful, big etc
cannot be termed Statistics.
Contd….

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 Statistics
Meaning-Plural
3. Affected by Multiple causes- Statistics is not impacted
by only 1 factor as multitude of factors influence it. For e.g
rise in prices can be attributed to reduction in supply,
increase in demand, rise in input costs etc.
4. Reasonable Accuracy- A reasonable degree of
accuracy must be maintaining while collecting the
statistical data.
5. Placed in relation to others- Such data is called
Statistics which is mutually related and comparable.
Features in Height of 40 people cannot be compared with age of 40
Plural sense people as data is not related.
6. Pre-determined purpose- Data collected without any
purpose or randomly will only be a numerical value and
not Statistics.
7. Enumerated or Estimated- Data can either be collected
by estimation (if the field of investigation is very vast) or
enumeration (for smaller set of data).
8. Collected in systematic manner- Haphazardly
collected data will not provide conclusive evidence so
systematic collection should be planned beforehand.
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 Statistics
Meaning-Singular
Under this, Statistics refers to science in which we deal with
techniques and methods for collecting, classifying, presenting,
Singular
analyzing and interpreting the data in the meaning of
sense Statistical methods.

Definitions- “Statistics may be defined as the collection, presentation,

analysis and interpretation of numerical data.”-Croxton and Cowden
Definitions “Statistics is the science which deals with the collection, classification
and tabulation of numerical facts as a basis for the explanation,
description and comparison of phenomena- Lovitt

Given the definitions, the following stages of Statistics emerge-

1. Collection of data- Decide how, where, when, what kind of data to
Features in be collected.
2. Organization of data- Organize the collected data to make it
Singular comparable and simple.
sense 3. Presentation of data- Make the data intelligible, brief and
attractive.
4. Analysis of data- To draw conclusions, analysis of data is
required by different methods e.g. central tendency, correlation.
5. Interpretation of data- Comparison and conclusions in simple and
easy language. 5
 Scope Statistics

The scope of Statistics may be classified into following 3 parts-

The study of nature is to find out whether Statistics is Science or Art

Nature As a science- It studies the Statistical data
As a Art- It makes use of data to solve problems of real life.
The subject matter of statistics is divided into 2 parts-
1. Descriptive statistics- It describes the data and consists of methods and
Subject techniques to explain characteristics of data. The methods can either be
Matter graphical or computational.
2. Inferential Statistics- It deals with methods which describe the
characteristics of population or making decisions concerning population on
the basis of sample results. Contd…. 6
Limitations
Scope Statistics
1. Study of Numerical facts-Statistics can only study such facts
which can be expressed in numerical terms.
2. Study of Aggregates only- Statistics studies only the aggregates
and not particular unit. No conclusion is possible from single piece
of data.
3. Not the only method- Statistics is not the only method to study
and many a time does not suggest the best solution of each
problem.
4. Homogeneity of data- Quantitative data has to be consistent and
homogeneous otherwise it will not be possible to draw conclusions.
5. Results are true only on an average- Statistical results only
express tendencies and are true on an average and not absolutely.
6. Without reference results may prove wrong- Circumstances
and conditions under which conclusions are made have to be
studied otherwise the results may give wrong impression.
7. Can be used by experts only- Only experts can make good use
of statistics and unqualified would find it difficult to apply it.
8. Misuse of Statistics is possible- The misuse of Statistics to seek
particular results is a possibility, more so when it is not easily
understood.
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Functions Statistics
1. Expression of facts in numbers-One of the main function of
Statistics is to express numbers in easily understandable language
and interpret the results with certainty.
2. Simple presentation- Statistics enables presentation of complex
data in a simple format in terms of aggregate, average,
percentage, graphs, diagrams etc.
3. Enlarges individual knowledge and experience- Statistics
expands the horizons of individual knowledge and understanding.
4. It compares facts- It facilitates the comparison of data and
identifying the interrelations between large sets of data for drawing
suitable inferences.
5. Facilitates policy formulation- By doing analysis and
interpretation of data, precise nature of problem can be
ascertained thus assisting policy formulation.
6. It helps other science in testing their laws- Statistics helps other
laws for establishing their assumptions. E.g. Many laws of
economics namely law of demand, law of supply, Keynes theory of
employment can be verified by Statistics.
7. It helps in forecasting- Extrapolating present data aids in
forecasting likely changes that can be expected in future.
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Uses & Importance Statistics
1. Importance for administrators- Administrators use data for
varied purposes and Statistics provide useful tools for decision
making support.
2. Importance for business, industry and agriculture- Estimating
demand and supply, studying seasonal changes, understanding
trade cycles, consumer profiling, product life cycle analysis are
examples of some of the functions that Statistics can perform for
business, industry and agriculture.
3. Importance in Economics- Statistics is basis of Economics as it
helps establishing the assumptions. Almost all the economic
aggregates are measured with the help of Statistics.
4. Importance for Politicians and in Social field- For formulating
social, economic, educational, industrial and other policies,
politicians draw great support from Statistics discipline.
Existing social problems can only be brought to fore front with the
help of data analysis. The effectiveness of existing policies for
social change can be measured by statistical tools.
5. Importance for banking and insurance industry- Bankers use
statistics for estimating credit growth, risk analysis, portfolio
management and insurers for establishing appropriate premiums
looking at life expectancies. 9
 Statistics

ROLE OF STATISTICS IN
MANAGEMENT DECISIONS
A. Marketing & Sales
- Product selection & competence strategies
- Utilization of resources including territory control
- Advertising decisions for cost & time effectiveness
- Forecasting & trend analysis
- Pricing & market research

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 Statistics

ROLE OF STATISTICS IN MANAGEMENT

DECISIONS contd…
B. Production Management
- Product mix & product positioning
- Facility & production planning
- Distribution management
- Material handling & facility planning
- Maintenance policies
- Activity planning & resources allocation
- Quality control decisions
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 Statistics

ROLE OF STATISTICS IN MANAGEMENT

DECISIONS contd…
C. Materials Management
- Buying policy- Sourcing & Procurement
- Material Planning & Lead Times
D. Finance, Investments & Budgeting
- Profit planning
- Cash Flow Analysis
- Investment decisions
- Dividend policy decisions
- Risk Analysis
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- Portfolio Analysis
 Statistics

ROLE OF STATISTICS IN MANAGEMENT

DECISIONS contd…

E. Personnel Management
- Optimum organization level
- Job evaluation & assignment analysis
- Social / habit analysis
- Salary / wage policies
- Recruitment & Training
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 Statistics

ROLE OF STATISTICS IN MANAGEMENT

DECISIONS contd…

F. Research & Development

- Area of thrust – Analysis & Planning
- Project Selection Criteria
- Alternatives analysis
- Trade – off analysis - cost & revenue
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 Key Definitions
• A population (universe) is the collection of things
under consideration
A parameter is a summary measure computed to
describe a characteristic of the population

• A sample is a portion of the population selected for

analysis
• A statistic is a summary measure computed to
describe a characteristic of the sample
 Population and Sample

Population Sample

Use statistics to
summarize features

Use parameters to
summarize features

Inference on the population

Chap 1-16 from the sample
Descriptive Statistics
• Collect data
– e.g. Survey
• Present data
– e.g. Tables and graphs
• Characterize data
– e.g. Sample mean = X i

n
 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.
 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
 Data Sources
Primary Secondary
Data Collection Data Compilation

Print or Electronic
Observation Survey

Experimentation

Chap 1-20
 Types of Data

Data

Categorical Numerical
(Qualitative) (Quantitative)

Discrete Continuous
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