Virtual Learning Environment - New Era University

College of Accountancy

Chapter One: Introduction to

Statistical Concepts and Methods
of Statistical Inference
Learning Outcomes
When you have completed this chapter, you will be able to:
1. Recognize and define important statistical terms and notations
2. Distinguish between descriptive and inferential statistics.
3. Distinguish between qualitative variable and quantitative variable,
between discrete variable and continuous variable.
4. Distinguish among the nominal, ordinal, interval, and ratio levels of
measurement.
5. Distinguish between the terms mutually exclusive and exhaustive.
6. Illustrate methods of statistical inference
7. Explore MS Excel Add-ins and SPSS
8. Relate the role of statistics in business
1-2

What is Meant by Statistics?

 Statistics is the science of collecting,
organizing, analyzing, presenting, and
interpreting numerical data for the purpose
of assisting in making a more effective
decision.
 Statistic (not to be confused with Statistics)
-characteristic or measure obtained from a
sample. It is a single value.
1-3

Who Uses Statistics?

 In today’s information society, decisions are made on the
basis of data. Sampling, techniques used in data collection,
◦ news reports, how to go about data description using
measures of central tendency and variability,
◦ poll results, interpret and draw conclusions
◦ game standings, What customers want, what to produce
◦ unemployment rates, and sell and in what quantities, plan
production, to check the quality of
◦ business trends, products, make decisions on location of
◦ forecasts. business, marketing, financial resources, etc

 Give example on the role of statistics in

 research,
 business & economics,
 politics & government, Profits earned from the deposits made by
 banking, clients, lending money on interest, financial
 accounting & auditing, resources, etc
Decision-making based on approximation,
 natural & social sciences, probability, projection, estimation, and
 education sampling techniques
 sports & entertainment,
Effectiveness of a particular teaching strategy,
 day-to-day activities improve teaching and learning strategies, etc
1-4

Types of Statistics
 Descriptive Statistics: Methods of
organizing, summarizing, and presenting
data in an informative way based on facts
and can be easily verified.
 EXAMPLE 1: A survey found that 25 companies account
for 76% of the market capitalization of all US stocks.
 EXAMPLE 2: According to Consumer Reports,
Whirlpool washing machine owners reported 9
problems per 100 machines during 2012. The statistic
9 describes the number of problems out of every 100
machines.
 Basic Terms

 Elements: Entities on which data are

collected
 Variable: Attribute that can assume any
different values
 Observation: Set of measurements obtained
for a particular element
 Data:Values that variables can assume
 Random Variable: Variables whose values are
determined by chance
 Data Set:A collection of data values
 Example:Table of Data Set
elements data variables

Company Exchange Ticker Business Share Earnings

Symbol Week Price per Share
Rank
AB N ABT 90 46 2.02
Group
DE Corp NQ MO 148 66 4.57
G Homes N APOL 19 43 0.57
L Fargo N BMY 36 71 5.77
M Care NQ CINF 5 91 3.94
Source: Business Week, (May 27, 2010) observation

A data set with 5 elements contains 5 observations

 Descriptive

Definition of terms

Sampling Techniques

Presentation of
Data Mean

Measures of Central Median

Tendency
Mode
Measures of
Variability Std Dev.
Measures of Skewness Range
and Kurtosis
C.V.
Normal Distribution
1-5

Types of Statistics
 Inferential Statistics: A decision, estimate,
prediction, or generalization about a
population, based on a sample.

 A population is a collection of all possible

individuals, objects, or measurements of
interest.
 A sample is a portion, or part, of the
population of interest.
1-6

Types of Statistics
(examples of inferential statistics)

 EXAMPLE 1: Experimental study on a new

drug to know if it will reduce the number
of heart attacks in men over 70 years of
age.
 EXAMPLE 2: Classifying air as healthy or
unhealthy based on the Air Quality Index
(AQI)
 EXAMPLE 3: Collecting data on the
volume of traffic flow in a busy street of
Manila.
 Inferential
Hypothesis Tests
Z-Test
Tests on Means
T-Test

F-Test

Z-Test
Tests on Proportions
Chi-Square Test
Reg. & Cor.Analysis
Test on Correlation
Pearson’s ‘r’
Simple Time Series Analysis
Spearman rank Chi-Square Test for
order correlation Independence
1-12

Sources of Statistical Data

 Researching problems usually requires
published data. Statistics on these
problems can be found in published
articles, journals, and magazines.
 Published data is not always available on a
given subject. In such cases, information
will have to be collected and analyzed.
 One way of collecting data is via
questionnaires (survey).
1-12

Sources of Statistical Data

Source Some of Data Typically Available
Employee records Name, Address, SSS number, salary, bonus, etc
Production records Product number, quantity produced, labor cost, etc
Inventory records Product number, number of units in hand, recorder
level, economic order quantity
Sales records Product number, sales volume, sales volume by region,
sales volume by customer type
Credit records Customer name, address, phone number, credit limit
Customer profile Age, gender, income, household size, preferences

Source: Modern Business Statistics (Williams,T.A., 2010)

1-13

Levels of Measurement
 Nominal level (scaled): Data that can only
be classified into categories and cannot be
arranged in an ordering scheme. It consist
of names or labels used to identify an
attribute of the element.
 EXAMPLES: eye color, gender, religious
affiliation, exchange (Slide 7)
 Note: A numeric code may be assigned to
prepare the data for entry into a computer
database.
1-14

Levels of Measurement
 Mutually exclusive: An individual or item
that, by virtue of being included in one
category, must be excluded from any other
category.
 EXAMPLE: eye color.
 Exhaustive: each person, object, or item
must be classified in at least one category.
 EXAMPLE: religious affiliation.
1-15

Levels of Measurement
 Ordinal level: exhibits the properties of
nominal data that may be arranged in
some order, but differences between data
values cannot be determined or are
meaningless. It can also be recorded using
a numeric code.
 EXAMPLE: quality of automotive repair
service so that each customer provide a
rating of excellent, good, or poor
 Likert questions is used in ordering
 Business Week Rank (slide 7)
1-16

Levels of Measurement
 Interval level: similar to the ordinal level. The
interval between values is expressed in terms
of fixed unit of measure and that meaningful
amounts of differences between data values
can be determined. The intervals between the
values of the interval variable are equally
spaced.There is no natural zero point.
 EXAMPLE:Temperature on the Fahrenheit
scale. Difference between 100 degC and 90
degC is the same as the difference between
90 degC and 80 degC
 EXAMPLE: IQ test
1-17

Levels of Measurement
 Ratio level: the interval level with an
inherent zero starting point. Differences
and ratios are meaningful for this level of
measurement. When the variable equals
zero, there is nothing of that variable.
 EXAMPLES: One person can lift 100 lbs and
another can lift 200lbs.
 EXAMPLES: money, number of votes
garnered by candidates
1-7

Types of Variables
 Qualitative or Categorical: data in the form
of classifications into different groups or
categories. The characteristic or variable
being studied is nonnumeric even though a
numerical code is used., therefore,
arithmetic operations do not provide
meaningful results.

 EXAMPLES: Gender, religious affiliation, type

of automobile owned, place of birth, eye
color.
1-8

Types of Variables
 Quantitative variable: data in the form of
numerical measurements or counts. The
variable can be reported numerically.
 EXAMPLE: ozone level of the air, minutes
remaining in class, number of children in a
family.
1-9

Types of Variables
 Quantitative variables can be classified as either
discrete or continuous.
 Discrete variables:Variables which assume a finite
or countable number of possible values. Usually
obtained by counting.
 EXAMPLE: the number of bedrooms in a house.
(1,2,3,..., etc...).
 Continuous variables:Variables which assume an
infinite number of possible values. Usually
obtained by measurement.
 EXAMPLE:The time it takes to fly from Manila to
Cebu.
1-9

Types of Quantitative Variables

 Quantitative variables can be classified as either
dependent or independent.
 Dependent variables:Variables which are affected
by another variable (outcome var).
 EXAMPLE: test scores is dependent on number of
hours spent in studying, IQ, attitude towards
studying, etc.
 Independent variables:Variables which affect the
dependent variables (explanatory var).
 EXAMPLE: Number of hours spent in studying
affects tests scores
 Compounding variables: One that influences the
outcome variable but was not separated from the
independent variable.
1-11

Summary of Types of Variables

DATA

Qualitative or attribute Quantitative or numerical

(type of car owned)

discrete continuous
(number of children) (time taken for an exam)
1-9

Cross-Sectional and Time Series

Data
 Cross-sectional: data collected at the
same or approximately the same point in
time.
 EXAMPLE: Data in Slide 7
 Time Series: data collected over several
time periods. It is usually depicted in
graphs to help analysts understand what
happened in the past, identify any trends
over time, and project future levels for
the time series.
1-17

Definitions
 Findings: are results of an investigation
 EXAMPLES: 54% of the 100 sample service crews in
randomly selected KFC outlets are 20 years old and
below
 Conclusion: an opinion based on findings; a generalization
on population based on the result of the investigation on
samples
 EXAMPLES:
 1. I therefore conclude that 54% of all KFC employees
nationwide are 20 years old and below.
 2. I therefore conclude that KFC prefers employees who
are 20 years old and below
 Inference: an educated guess or a meaningful prediction
based on findings and conclusions
 EXAMPLES: If this trend continues, then job applicants
who are 22 years and above have very slim chance of
being employed at KFC
Assessment:
1.A statistic is
a. collection of values b. single value.
c. The sum of several values. d. The largest value in a set of observations

2. In descriptive statistics our main objective is to

a. Describe the population. b. Describe the data we collected.
c. Infer something about the population. d.Compute an average.

3. Which of the following statements is true regarding a population?

a. It must be a large number of values. b. It must refer to people.
c. It is a collection individuals, objects, or measurements.
d. None of the above.

4. Which of the following statements is true regarding a sample?

a. It is a part of population. b. It must contain at least five observations.
c. It refers to descriptive statistics. d. All of the above are correct.

5. A qualitative variable
a. Always refers to a sample. b. Is nonumeric.
c. Always has only two possible outcomes. d. All of the above are correct.

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Assessment:
6. A discrete variable
a. Is an example of a qualitative variable. b.Can assume any number values.
c. Can assume only certain clearly separated values.
d. Cannot be negative.

7. A nominal scale variable is

a. Usually the result of counting something. b. Has a meaningful zero point.
c. May assume negative values.
d. Cannot have more than two categories.

8. The ratio scale of measurement

a. Usually involves ranking. b. Cannot assume negative values.
c. Has a meaningful zero point. d. Is usually based on counting.
9. The ordinal scale of measurement
a. Has a meaningful zero point. b. Is based on ranks.
c. Cannot assume negative values. d. All of the above.
10. Categories are exhaustive when
a.There is a meaningful zero point. b.The objects can be ranked.
c. Each object must appear in at least one category.
d. Each object can be included in only one category.
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11. On a scale of 1-4, with 4 being the highest, rate your degree of confidence that you
can explain well the topic under this module to your friend/classmate.
4 – very confident
3 – confident
2 – not so confident
1- not confident at all

Assignment:
Submit one research article (not a news article) on any topic. It should be a
result of any survey conducted locally (preferred) or abroad.
1. If the article is more than 2 pages, make a summary.
2. Give the name of the magazine/journal and the author of the article, date published
3. Give the title of the article
4. Highlight the population/sample/margin of error used in the article. Identify statements
which belong to descriptive statistics and inferential statistics
5. Find out the population/sample used in the survey (give N/n)
6. Upload assignment in VLE

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