Basic Business Statistics

Introduction and Data Collection

Chap 1-1
 Learning Objectives

In this chapter you learn:

 How Statistics is used in business

 The sources of data used in business
 The types of data used in business

Chap 1-2
 Why Learn Statistics?

So you are able to make better sense of the

global use of numbers:
 Business documents

 Business research

 Technical reports

 Technical journals

 Newspaper articles

 Magazine articles

Chap 1-3
 What is statistics?

 A branch of mathematics taking and

transforming numbers into useful information for
decision makers

 Methods for processing & analyzing numbers

 Methods for helping reduce the uncertainty

inherent in decision making

Chap 1-4
 Why Study Statistics?

Decision Makers Use Statistics To:

 Present and describe business data and information properly
 Draw conclusions about large groups of individuals or items,
using information collected from subsets of the individuals or
items.
 Make reliable forecasts about a business activity
 Improve business processes

Chap 1-5
 Types of Statistics

 Statistics
 The branch of mathematics that transforms data into
useful information for decision makers.

Descriptive Statistics Inferential Statistics

Collecting, summarizing, and Drawing conclusions and/or

describing data making decisions concerning a
population based only on sample
data

Chap 1-6
 Descriptive Statistics

 Collect data
 e.g., Survey

 Present data
 e.g., Tables and graphs

 Characterize data
 e.g., Sample mean =
 X i

Chap 1-7
 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 about a large group of

individuals based on a subset of the large group.

Chap 1-8
 Basic Vocabulary of Statistics

VARIABLE
A variable is a characteristic of an item or individual.

DATA
Data are the different values associated with a variable.

Chap 1-9
 Basic Vocabulary of Statistics
POPULATION
A population consists of all the items or individuals about which you want to
draw a conclusion.

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.
A parameter is a number describing a whole population (e.g., population
mean), while a statistic is a number describing a sample (e.g., sample mean).

STATISTIC
A statistic is a numerical measure that describes a characteristic of a sample.

Chap 1-10
 Population vs. Sample

Population Sample

Measures used to describe the Measures computed from

population are called parameters sample data are called statistic

Chap 1-11
 Why Collect Data?
 A marketing research analyst needs to assess the
effectiveness of a new television advertisement.

 A pharmaceutical manufacturer needs to determine

whether a new drug is more effective than those currently
in use.

 An operations manager wants to monitor a manufacturing

process to find out whether the quality of the 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.

Chap 1-12
 Sources of Data

 Primary Sources: The data collector is the one using the data
for analysis
 Data from a 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.

Chap 1-13
 Types of Variables

 Categorical (qualitative) variables have values that

can only be placed into categories, such as “yes” and
“no.”

 Numerical (quantitative) variables have values that

represent quantities.

Chap 1-14
 Types of Data

Data

Categorical Numerical

Examples:
 Marital Status
 Political Party Discrete Continuous
 Eye Color
(Defined categories) Examples: Examples:
 Number of Children  Weight
 Defects per hour  Voltage
(Counted items) (Measured characteristics)

Chap 1-15
 Levels of Measurement

 A nominal scale classifies data into distinct categories in

which no ranking is implied.

Categorical Variables Categories

Personal Computer Yes / No

Ownership

Chap 1-16
 Levels of Measurement

 An ordinal scale in which numbers are assigned to the

categories or variable values for identification as well as
for ranking is called an ordinal scale.
Categorical Variable Ordered Categories

Student class designation Freshman, Sophomore, Junior,

Senior
Product satisfaction Satisfied, Neutral, Unsatisfied

Faculty rank Professor, Associate Professor,

Assistant Professor, Instructor
Standard & Poor’s bond ratings AAA, AA, A, BBB, BB, B, CCC, CC,
C, DDD, DD, D
Student Grades A, B, C, D, F

Chap 1-17
 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.

Chap 1-18
Interval and Ratio Scales

Chap 1-19