Business statistics

Introduction
What Is Business Statistics?

Business statistics is a method of using statistics to gain valuable

information from the data available to a company. Various techniques and
principles of statistics are applied to gain insights that help to make better
decisions. It is a method of using numerical data that they collect from
various sources. The information can come from surveys, experiments or
other information systems in the company. It helps organisations
understand the reasons for various events in the present and predict the
future. It can be used in marketing, production planning, human resource
planning, finance, etc.

Definition
Certainly! Let’s explore the definitions of business statistics provided by various scholars:

1. Bowleg: “Statistics may rightly be called the science of averages.”

2. Prof. Boddington: “The science of estimate and probabilities.”
3. Prof. Horace Secrist: “Statistics is the aggregate of facts affected to a marked extent
by the multiplicity of causes, numerically expressed, enumerated or estimated
according to reasonable standards of accuracy, collected in a systematic manner for a
pre-determined purpose and placed in relation to each other.”
4. American Heritage Dictionary: “The mathematics of the collection, organization,
and interpretation of numerical data, especially the analysis of population
characteristics by inference from sampling.”
5. A.L. Bowley: “Statistics are numerical statements of facts in any department of
inquiry placed in relation to each other.”
6. Wallis and Roberts: “Statistics is a body of methods for making wise decisions in the
face of uncertainty.”
7. Croxton and Cowden: “Statistics may be defined as the collection, presentation,
analysis, and interpretation of numerical data.”
8. Edward N. Dubois: “Statistics is a body of methods for obtaining and analyzing
numerical data in order to make better decisions in an uncertain world.”
9. Merriam-Webster’s Dictionary: “A branch of mathematics dealing with the
collection, analysis, interpretation, and presentation of masses of numerical data.”
10. Prof. Ya Lun Chaou: “Statistics is a method of decision-making in the face of
uncertainty based on numerical data and calculated risk.”
11. W.I. King: “The science of statistics is the method of judging collection, natural or
social phenomena from the results obtained from the analysis or enumeration or
collection of estimates.”
Functions of Statistics
Statistics can be well-defined as a branch of research which is
concerned with the development and application of techniques for
collecting, organising, presenting, analysing and interpreting data in
such a manner that the reliability of conclusions may be evaluated
in terms of probability statements.

Statistical methods and processes are useful for business

development and, hence, applied to enormous numerical facts with
an objective that “behind every figure, there’s a story”.

Some key functions of statistics are as follows:

 Condensation
 Comparison
 Forecast
 Testing of hypotheses
 Preciseness
 Expectation

Condensation
Statistics can be used to compress a large amount of data into small
meaningful information; for example, aggregated sales forecast, BSE
indices, GDP growth rate, etc. It is almost impossible to get a
complete idea of the profitability of a company by looking at the
records of its income and expenditure. Financial ratios such as
return on investment, earnings per share, profit margins, etc.,
however, can be easily remembered and thus can be used in quick
decision making.

Comparison
Statistics facilitate comparing different quantities. For example, the
price-to-earnings ratio of ITC as of January 22, 2021 is 19.54 as
compared to HUL. HUL is overvalued, quoting a price-to-earnings
ratio of 71 times.

Forecast
Statistics helps forecast by looking at trends of a variable. It is
essential for planning and decision-making. Predictions or forecasts
based on intuition can be disastrous for any business.

For example, to decide the production capacity for a vehicle-

manufacturing plant, we need to predict the demand for the product
mix, supply of components, cost of manpower, competitor strategy,
etc., over the next 5 to 10 years, before committing an investment.
Testing of hypotheses
Hypotheses are statements about population parameters based on
knowledge from literature that a researcher would like to test for
validity in the light of new information. Drawing inferences about the
population using sample estimates involves an element of risk.

Preciseness
Statistics visualises and presents facts precisely in a quantitative
form. Facts and information conveyed in quantitative terms are
more convincing than qualitative data. For example, ‘increase in
profit margin is less in the year 2020 than in the year 2019’ does not
convey a precise and complete piece of information.

On the other hand, statistics summarise the information more

precisely. For example, ‘profit margin is 5% of the turnover in the
year 2020 against 7% in the year 2019’.

Expectation
Statistics can act as the basic building block for framing clear plans
and policies. For example, how much raw material to be imported in
a year, how much capacity to be expanded, or manpower to be
recruited, etc., depends on the expected value of outcome of our
decisions taken under different situations.

Importance of Statistics
Statistics in today’s life has become an essential part of various
business activities which is clear from the following points.

The importance of statistics in the following major areas:

1. Importance of Statistics in Business and Industry

2. Importance in the Field of Science and Research
3. Importance in the Field of Banking
4. Importance to the State
5. Importance in planning
Importance of Statistics in Business and
Industry
In past days, decisions regarding business were made only on
personal judgement. However, in these days, they are based on
several mathematical and statistical techniques and the best
decision is arrived by using all these techniques.

For example, by using the testing hypothesis, we can reject or

accept the null hypothesis which are based upon the assumption
made from the population or universe

By using ‘Bayesian Decision Theory’ or ‘Decision Theory’, we

can select the optimal decisions for the direct evaluation of
the payoff for each alternative course of action.
Mathematics and statistics have become ingredients of various
decisions problems which is clear from the following:

 In Selecting Alternative Course of Action: The process of

business decisions involve the selection of a single action
among some set of alternative actions. When there are two
or more alternative courses of action, and we need only one
course of action, statistical decisions theory helps us in
selecting the required course of action by applying Bayesian
decision theory and thus saves lot of time.

 In Removing Uncertainty: In decision-making problems,

uncertainty is very common in a situation, when the course
of action is not known to us. When there are many possible
outcomes of an event, we cannot predict with certainty that
what will happen. By applying the concept of joint and
conditional probability, the uncertainty about the event can
be removed very easily.

 In Calculating E.O.L., C.O.L., etc.: In business, the

opportunity loss is very often, which can be defined as the
difference between the highest possible profit for an event
and the actual profit obtained for the actual action taken.
The expected opportunity loss (E.O.L.) and conditional
opportunity loss (C.O.L.) can be easily calculated by using
the concept of maximum and minimum criteria of pay-off.
Importance in the Field of Science and
Research
Statistics has great significance in the field of physical and natural
sciences. It is widely used in verifying scientific laws and
phenomenon.

For example, to formulate standards of body temperature, pulse

rate, blood pressure, etc. The success of modern computers
depends on the conclusions drawn on the basis of statistics.

Importance in the Field of Banking

In banking industry, the bankers have to relate demand deposits,
time deposits, credit etc. It is on the basis of data relating to
demand and time deposits that the bankers determine the credit
policies. The credit policies are based on the theory of probability.

Importance to the State

We know that the subject of statistics originated for helping the
ancient rulers in the assessment of their military and economic
strength. Gradually its scope was enlarged to tackle other problems
relating to political activities of the State.

In the modern era, the role of State has increased and various
governments of the world also take care of the welfare of its people.
Therefore, these governments require much greater information in
the form of numerical figures for the fulfilment of welfare objectives
in addition to the efficient running of their administration.

Importance in planning
Planning is indispensable for achieving faster rate of growth through
the best use of a nation’s resources. It also requires a good deal of
statistical data on various aspects of the economy.

One of the aims of planning could be to achieve a specified rate of

growth of the economy. Using statistical techniques, it is possible to
assess the amounts of various resources available in the economy
and accordingly determine whether the specified rate of growth is
sustainable or not.
Scope of Statistics
The following are the main scope of statistics:

1. Presents facts in numerical figures

2. Presents complex facts in a simplified form
3. Studies relationship between two or more phenomena
4. Helps in the formulation of policies
5. Helps in forecasting
6. Provides techniques for testing of hypothesis
7. Provides techniques for making decisions under uncertainty
Presents facts in numerical figures
The first function of statistics is to present a given problem in terms
of numerical figures. We know that the numerical presentation helps
in having a better understanding of nature an of problem.

Presents complex facts in a simplified form

Generally, a problem to be investigated is represented by a large
mass of numerical figures which are very difficult to understand and
remember. Using various statistical methods, this large mass of data
can be presented in a simplified form.

Studies relationship between two or more

phenomena
Statistics can be used to investigate whether two or more
phenomena are related. For example, the relationship between
income and consumption, demand and supply, etc.

Helps in the formulation of policies

Statistical analysis of data is the starting point in the formulation of
policies in various economic, business and government activities.

For example, using statistical techniques a firm can know the tastes
and preferences of the consumers and decide to make its product
accordingly.

Helps in forecasting
The success of planning by the Government or of a business
depends to a large extent upon the accuracy of their forecasts.
Statistics provides a scientific basis for making such forecasts.
Provides techniques for testing of hypothesis
A hypothesis is a statement about some characteristics of a
population (or universe).

Provides techniques for making decisions

under uncertainty
Many times we face an uncertain situation where any one of the
many alternatives may be adopted. A businessman might face a
situation of uncertain investment opportunities in which he can lose
or gain.

He may be interested in knowing whether to undertake a particular

investment or not. The answer to such problems are provided by the
statistical techniques of decision-making under uncertainty.

Limitations of Statistics
Statistics is considered to be a science as well as an art, which is
used as an instrument of research in almost every sphere of our
activities.

Some of the limitations of statistics are as follows:

1. Statistics Suits to the Study of Quantitative Data Only

2. Statistical Results are not Exact
3. Statistics Deals with Aggregates Only
4. Statistics is Useful for Experts Only
5. Statistics does not Provide Solutions to the Problems
Statistics Suits to the Study of Quantitative
Data Only
Statistics deals with the study of quantitative data only. By using the
methods of statistics, the problems regarding production, income,
price, wage, height, weight etc. can be studied. Such characteristics
are quantitative in nature.

The characteristics like honesty, goodwill, duty, character, beauty,

intelligence, efficiency, integrity etc. are not capable of quantitative
measurement and hence cannot be directly dealt with statistical
methods. These characteristics are qualitative in nature.
In such type of characteristics, only comparison is possible The use
of statistical methods is limited to quantitative characteristics and
those qualitative characteristics which are capable of being
expressed numerically.

Statistical Results are not Exact

The task of statistical analysis is performed under certain conditions.
It is not always possible, rather not advisable, to consider the entire
population during statistical investigations.

The use of samples is called for in statistical investigations. And the

results obtained by using samples may not be universally true for
the entire population. Data collected for a statistical enquiry may
not be hundred percent true. Statistical results are true on an
average.

Statistics Deals with Aggregates Only

Statistics does not recognise individual items. Consider the
statement, “The weight of Mr X in the college is 70 kg”. This
statement does not constitute statistical data. Statistical methods
are not going to investigate anything about this statement.
Whereas, if the weights of all the students of the college are given,
the statistical methods may be applied to analyse that data.

According to Tippett, “Statistics is essentially totalitarian because it

is not concerned with individual values, but only with classes”.
Statistics is used to study group characteristics of aggregates.

Statistics is Useful for Experts Only

Statistics is both a science and an art. It is systematic and finds
applications in studying problems in Economics, Business,
Astronomy, Physics, Medicines etc. Statistical methods are
sophisticated in nature. Everyone is not expected to possess the
intelligence required to understand and to apply these methods to
practical problems. This is the job of an expert, who is well-versed
with statistical methods

Statistics does not Provide Solutions to the

Problems
The statistical methods are used to explore the essentials of
problems. It does not find use in inventing solutions to problems. For
example, the methods of statistics may reveal the fact that the
average result of a particular class in a college is deteriorating for
the last ten years, i.e., the trend of the result is downward, but
statistics cannot provide solution to this problem.

It cannot help in taking remedial steps to improve the result of that

class. Statistics should be taken as a means and not as an end. The
methods of statistics are used to study the various aspects of the
data.

) Give reasons for distrust in Statistics

. Ans.: By distrust of statistics we mean lack of confidence in statistical
statements and statistical methods. It is often commented by people “Statistics
can prove anything.” “There are three type of lies – lies, damned lies and
statistics – wicked in the order of their naming.” The main reasons for such views
are - a) Figures are convincing, and therefore people are easily led to believe
them. b) Ignorance of limitation of statistics. c) Lack of test of accuracy. d)
Contradiction of data from actual circumstances. e) Lack of specific ability to
arrive at correct and appropriate results. f) Can easily be manipulated.

Types of Statistical Methods

There are innumerable number of statistical methods which can
be broadly classified into five types as thus:

(i) Descriptive methods

(ii) Analytical methods

(iii) Inductive methods

(iv) Inferential methods

(v) Applied methods.

A brief analysis of each of the above methods is made as under :

Descriptive Methods

This type of method consists of all the preliminary steps to final

analysis and interpretation. As such this method includes the
method of collection, methods of tabulation, measures of central
tendency, measures of dispersion, measures of skewness, and
analysis of time series. These methods bring out the various
characteristics of data and help in summerising and interpreting
the salient features of the data. This method is also otherwise
called descriptive statistics.

Analytical Methods

This type of method consists of all those methods which help in

the matter of analysis and comparison between any two or more
variables. This includes the methods of correlation, regression
analysis, association of attributes and the like. This method is also
otherwise called analytical statistics.

Inductive Methods

This type of method consists of all those procedures that help in

the generalization or estimation over a phenomenon on the basis
of random observation or partial data. This includes the procedure
of interpolation, extrapolation, theory of probability and the like.
This methods is also otherwise called inductive statistics.

Inferential Methods

This type of method consists of those procedures which help

which in drawing inferences about the characteristics of the
population on the basis of samples. As such, this method includes
the theory of sampling, different tests of significance, statistical
control etc. This method is also otherwise called inferential
statistics.

Applied Methods

This type of method consists of those procedures which are

applied to the problems of real life. This includes the method of
statistical quality control, sample survey, linear programming,
inventory control and the like.

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Types of Statistical Methods
There are innumerable number of statistical methods which can
be broadly classified into five types as thus:

(i) Descriptive methods

(ii) Analytical methods

(iii) Inductive methods

(iv) Inferential methods

(v) Applied methods.

A brief analysis of each of the above methods is made as under :

Descriptive Methods

This type of method consists of all the preliminary steps to final

analysis and interpretation. As such this method includes the
method of collection, methods of tabulation, measures of central
tendency, measures of dispersion, measures of skewness, and
analysis of time series. These methods bring out the various
characteristics of data and help in summerising and interpreting
the salient features of the data. This method is also otherwise
called descriptive statistics.

Analytical Methods

This type of method consists of all those methods which help in

the matter of analysis and comparison between any two or more
variables. This includes the methods of correlation, regression
analysis, association of attributes and the like. This method is also
otherwise called analytical statistics.

Inductive Methods

This type of method consists of all those procedures that help in

the generalization or estimation over a phenomenon on the basis
of random observation or partial data. This includes the procedure
of interpolation, extrapolation, theory of probability and the like.
This methods is also otherwise called inductive statistics.

Inferential Methods

This type of method consists of those procedures which help

which in drawing inferences about the characteristics of the
population on the basis of samples. As such, this method includes
the theory of sampling, different tests of significance, statistical
control etc. This method is also otherwise called inferential
statistics.

Applied Methods
This type of method consists of those procedures which are
applied to the problems of real life. This includes the method of
statistical quality control, sample survey, linear programming,
inventory control and the like.

Data analysis and interpretation

Data interpretation is the process of making sense of data and turning it into actionable
insights. With the rise of big data and advanced technologies, it has become more important
than ever to be able to effectively interpret and understand data.

In today's fast-paced business environment, companies rely on data to make informed

decisions and drive growth. However, with the sheer volume of data available, it can be
challenging to know where to start and how to make the most of it.

This guide provides a comprehensive overview of data interpretation, covering everything

from the basics of what it is to the benefits and best practices.

What is Data Interpretation?

Data interpretation refers to the process of taking raw data and transforming it into useful
information. This involves analyzing the data to identify patterns, trends, and relationships,
and then presenting the results in a meaningful way. Data interpretation is an essential part of
data analysis, and it is used in a wide range of fields, including business, marketing,
healthcare, and many more.

Importance of Data Interpretation in Today's World

Data interpretation is critical to making informed decisions and driving growth in today's
data-driven world. With the increasing availability of data, companies can now gain valuable
insights into their operations, customer behavior, and market trends. Data interpretation
allows businesses to make informed decisions, identify new opportunities, and improve
overall efficiency.
Types of Data Interpretation
There are three main types of data interpretation: quantitative, qualitative, and mixed
methods.

Quantitative Data Interpretation

Quantitative data interpretation refers to the process of analyzing numerical data. This type of
data is often used to measure and quantify specific characteristics, such as sales figures,
customer satisfaction ratings, and employee productivity.

Qualitative Data Interpretation

Qualitative data interpretation refers to the process of analyzing non-numerical data, such as
text, images, and audio. This data type is often used to gain a deeper understanding of
customer attitudes and opinions and to identify patterns and trends.

Mixed Methods Data Interpretation

Mixed methods data interpretation combines both quantitative and qualitative data to provide
a more comprehensive understanding of a particular subject. This approach is particularly
useful when analyzing data that has both numerical and non-numerical components, such as
customer feedback data.

Methods of Data Interpretation

There are several data interpretation methods, including descriptive statistics, inferential
statistics, and visualization techniques.

Descriptive Statistics

Descriptive statistics involve summarizing and presenting data in a way that makes it easy to
understand. This can include calculating measures such as mean, median, mode, and standard
deviation.
Inferential Statistics

Inferential statistics involves making inferences and predictions about a population based on
a sample of data. This type of data interpretation involves the use of statistical models and
algorithms to identify patterns and relationships in the data.

Visualization Techniques

Visualization techniques involve creating visual representations of data, such as graphs,

charts, and maps. These techniques are particularly useful for communicating complex data
in an easy-to-understand manner and identifying data patterns and trends.

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Benefits of Data Interpretation

Data interpretation plays a crucial role in decision-making and helps organizations make
informed choices. There are numerous benefits of data interpretation, including:

 Improved decision-making: Data interpretation provides

organizations with the information they need to make informed
decisions. By analyzing data, organizations can identify trends,
patterns, and relationships that they may not have been able to
see otherwise.
 Increased efficiency: By automating the data interpretation
process, organizations can save time and improve their overall
 efficiency. With the right tools and methods, data interpretation
can be completed quickly and accurately, providing organizations
with the information they need to make decisions more efficiently.
 Better collaboration: Data interpretation can help organizations
work more effectively with others, such as stakeholders, partners,
and clients. By providing a common understanding of the data and
its implications, organizations can collaborate more effectively and
make better decisions.
 Increased accuracy: Data interpretation helps to ensure that data
is accurate and consistent, reducing the risk of errors and
miscommunication. By using data interpretation techniques,
organizations can identify errors and inconsistencies in their data,
making it possible to correct them and ensure the accuracy of
their information.
 Enhanced transparency: Data interpretation can also increase
transparency, helping organizations demonstrate their
commitment to ethical and responsible data management. By
providing clear and concise information, organizations can build
trust and credibility with their stakeholders.
 Better resource allocation: Data interpretation can help
organizations make better decisions about resource allocation. By
analyzing data, organizations can identify areas where they are
spending too much time or money and make adjustments to
optimize their resources.
 Improved planning and forecasting: Data interpretation can also
help organizations plan for the future. By analyzing historical data,
organizations can identify trends and patterns that inform their
forecasting and planning efforts.
Data Interpretation Process
Data interpretation is a process that involves several steps, including:
 Data collection: The first step in data interpretation is to collect
data from various sources, such as surveys, databases, and
websites. This data should be relevant to the issue or problem the
organization is trying to solve.
 Data preparation: Once data is collected, it needs to be prepared
for analysis. This may involve cleaning the data to remove errors,
missing values, or outliers. It may also include transforming the
data into a more suitable format for analysis.
 Data analysis: The next step is to analyze the data using various
techniques, such as statistical analysis, visualization, and
modeling. This analysis should be focused on uncovering trends,
patterns, and relationships in the data.
 Data interpretation: Once the data has been analyzed, it needs to
be interpreted to determine what the results mean. This may
involve identifying key insights, drawing conclusions, and making
recommendations.
 Data communication: The final step in the data interpretation
process is to communicate the results and insights to others. This
may involve creating visualizations, reports, or presentations to
share the results with stakeholders.