Stat Assignemt

‘Statistics helps in Business Decision Making Process’
Submitted To:
University
Submitted from:
MBA (2 years)
Second Semester
University
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.
Business statistics is a scientific approach to decision making under risk. In practicing

business statistics, we search for an insight, not the solution. Our search is for the one
solution that meets all the business's needs with the lowest level of risk. Business
statistics can take a normal business situation, and with the proper data gathering,
analysis, and re-search for a solution, turn it into an opportunity.
While business statistics cannot replace the knowledge and experience of the decision
maker, it is a valuable tool that the manager can employ to assist in the decision making
process in order to reduce the inherent risk, measured by, e.g., the standard deviation.
Unlike the deterministic decision-making process, such as linear optimization by solving

systems of equations, Parametric systems of equations and in decision making under pure
uncertainty, the variables are often more numerous and more difficult to measure and
control. However, the steps are the same. They are:
1. Simplification
2. Building a decision model
3. Testing the model
4. Using the model to find the solution:
o It is a simplified representation of the actual situation
o It need not be complete or exact in all respects
o It concentrates on the most essential relationships and ignores the less
essential ones.
o It is more easily understood than the empirical (i.e., observed) situation,
and hence permits the problem to be solved more readily with minimum
time and effort.
5. It can be used again and again for similar problems or can be modified.
Fortunately the probabilistic and statistical methods for analysis and decision making
under uncertainty are more numerous and powerful today than ever before. The computer
makes possible many practical applications. A few examples of business applications are
the following:
• An auditor can use random sampling techniques to audit the accounts receivable
for clients.
• A plant manager can use statistical quality control techniques to assure the quality
of his production with a minimum of testing or inspection.
• A financial analyst may use regression and correlation to help understand the
relationship of a financial ratio to a set of other variables in business.
• A market researcher may use test of significace to accept or reject the hypotheses
about a group of buyers to which the firm wishes to sell a particular product.
• A sales manager may use statistical techniques to forecast sales for the coming
year.
Questions Concerning Statistical the Decision-Making Process:
1. Objectives or Hypotheses: What are the objectives of the study or the questions
to be answered? What is the population to which the investigators intend to refer
their findings?
2. Statistical Design: Is the study a planned experiment (i.e., primary data), or an
analysis of records ( i.e., secondary data)? How is the sample to be selected? Are
there possible sources of selection, which would make the sample atypical or non-
representative? If so, what provision is to be made to deal with this bias? What is
the nature of the control group, standard of comparison, or cost? Remember that
statistical modeling means reflections before actions.
3. Observations: Are there clear definition of variables, including classifications,
measurements (and/or counting), and the outcomes? Is the method of
classification or of measurement consistent for all the subjects and relevant to
Item No. 1.? Are there possible biased in measurement (and/or counting) and, if
so, what provisions must be made to deal with them? Are the observations reliable
and replicable (to defend your finding)?
4. Analysis: Are the data sufficient and worthy of statistical analysis? If so, are the
necessary conditions of the methods of statistical analysis appropriate to the
source and nature of the data? The analysis must be correctly performed and
interpreted.
5. Conclusions: Which conclusions are justifiable by the findings? Which are not?
Are the conclusions relevant to the questions posed in Item No. 1?
6. Representation of Findings: The finding must be represented clearly,
objectively, in sufficient but non-technical terms and detail to enable the decision-
maker (e.g., a manager) to understand and judge them for himself? Is the finding
internally consistent; i.e., do the numbers added up properly? Can the different
representation be reconciled?
7. Managerial Summary: When your findings and recommendation(s) are not
clearly put, or framed in an appropriate manner understandable by the decision
maker, then the decision maker does not feel convinced of the findings and
therefore will not implement any of the recommendations. You have wasted the
time, money, etc. for nothing.

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‘Statistics helps in Business Decision Making Process’

Business statistics is a scientific approach to decision making under risk. In practicing

Unlike the deterministic decision-making process, such as linear optimization by solving

Questions Concerning Statistical the Decision-Making Process:

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