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What Is Business Statistics?

A collection of procedures and techniques that are used to convert data into meaningful
information in a business environment.
The most common description of statistics is that its the process of analyzing data
number crunching, in a sense. But statistics is not just about analyzing the data.

Its about the whole process of using the scientific method to answer questions and
make decisions. That process involves designing studies, collecting good data,
describing the data with numbers and graphs, analyzing the data, and then making
conclusions.

Business Statistics is the science of good' decision


making in the face of uncertainty and is used in
many disciplines, such as financial analysis,
econometrics, auditing, production and operations,
and marketing research. It provides knowledge and
skills to interpret and use statistical techniques in a
variety of business applications. A typical Business
Statistics course is intended for business majors,
and covers statistical study, descriptive statistics
(collection, description, analysis, and summary of
data), probability, and the binomial and normal
distributions, test of hypotheses and confidence
intervals, linear regression, and correlation.

Importance of Statistics
in Modern Business Environment With fast
moving technologies, advanced
communication network, rapid changes in
consumer behaviour, varied expectations
of variety of consumers and new
market openings, modern managers have
difficult task of making quick and
appropriate decisions. Therefor e there is
need for them to depend more upon
quantitative techniques like mathematical
models statistics, operation research and
econometrics. These techniques push
back the domain of ignorance and rule of
thumb and enlightens them with new

Branches of Statistics
1. Descriptive Statistics
2. Inferential Statistics
Descriptive Statistics:
The procedures and techniques that comprise business statistics include those specially designed to describe data, such as
charts, graphs, and numerical measures.

Example
During the 1990s and early 2000s, many major
changes
occurred
in the financial services industry. Numerous banks
merged. Money flowed into the stock market at
rates far surpassing anything the U.S. economy had
previously witnessed. The international financial
world fluctuated greatly. All these developments
have spurred the need for more financial analysts
who can critically evaluate and explain financial
data to customers. At Crown Investments, a senior
analyst is preparing to present data to upper
management on the 100 fastest growing companies
on the Hong Kong Stock Exchange.

In addition to preparing appropriate graphs, the


analyst will compute important numerical
measures. One of the most basic and most useful
measures in business statistics is one
with which you are already familiar: the arithmetic
mean or average.

The total profit for the 100 companies


is $3,193.60, but profits are given in
millions of dollars, so the total profit
amount is actually $3,193,600,000.
The average is found by dividing this
total by the number of companies:
Average =
= $31,936,000 Million Dollars

Another Example

Inferential Statistics
How do television networks determine which
programs people prefer to watch? How does the
network that carries the FIFA cup, know how many
people watched the game? Advertisers pay for
television ads based on the audience level, so these
numbers are important; millions of dollars are at
stake. Clearly, the networks dont check with
everyone in the country. Instead, they use statistical
inference procedures to come up with this
information. There are two primary categories of
statistical inference procedures :
estimation and hypothesis testing.
These procedures are closely related but serve very
different
purposes.

TV RATINGS:
The television networks cannot know for sure how many
people watched last years Super Bowl. They cannot
possibly ask everyone what he or she saw that day on
television. Instead, the networks rely on organizations
such as Nielsen Media Research to supply program
ratings. For example, Nielsen (www.nielsenmedia.com)
surveys people
from only a small number of homes across the country
asking what shows they watched, and then uses the data
from the survey to estimate the number of viewers per
show for the entire population.
Advertisers and television networks enter into contracts
in which price per ad is based on a certain minimum
viewership. If Nielsen Media Research estimate an
audience smaller than this minimum, then a network
must refund some money to its advertisers.

Hypothesis Testing
Television advertising is full of product
claims. For example, we might hear
that Goodyear tires will last at least
60,000 miles or that more doctors
recommend Bayer Aspirin than any
other brand. Other claims might
include statements like General
Electric light bulbs last longer than any
other brand or customers prefer
McDonalds over Burger King. Are
these just idle boasts, or are they
based on actual data?

Populations, Samples, and Sampling Techniques


Population
The set of all objects or individuals of interest or
the measurements obtained from all objects or
individuals of interest.
Sample
A subset of the population.

A population includes measurements made on all the items of interest to the data gatherer. In our example,
the McDonalds manager would define the population as the waiting time for all 566 cars. The list of these
cars, possibly by license number, forms the frame. If she examines the entire population, she is taking a
census. But suppose 566 cars are too many to track. The McDonalds manager could instead select a subset of
these cars, called a sample.

The manager could use the sample results to make inferences about the
population. For example, she might calculate the average waiting time
for the sample of cars and then use that to conclude what the average
waiting time is for the population.

Parameters and Statistics


Descriptive numerical measures, such as an average or a proportion, that are computed from an entire population are called parameters.
Corresponding
measures for a sample are called statistics. Suppose in the previous example the McDonalds
manager timed every car that arrived at the drive-thru on a particular day and calculated the
average. This population average waiting time would be a parameter. However, if she selected
a sample of cars from the population, the average waiting time for the sampled cars would be
a statistic.