INTRODUCTION

CHAPTER ONE
TO STATISTICS
 • In a business environment managers can make sound
decisions when they use all relevant information in an
effective and meaningful manner.

• The principal purpose of statistics is to provide decision-

makers with a set of techniques for collecting, analyzing,
and draw meaningful inferences that lead to improved
decisions.
Introduction • Now a day, statistical tools are widely used to aid decision-
makers in all functional areas of management.

• The purpose of this chapter is to provide you the basic ideas

and concepts of statistics at a general level.
 • Different authors define statistics differently based on their
area of concern of this;

 Statistics is defined as the science which deals with the

method of collecting, classifying, presenting, comparing, and
interpreting numerical data “Seligman”.
What is
 A.L. Bowley has defined statistics as:
Statistics?
i. statistics is the science of counting,

ii. Statistics may rightly be called the science of averages

iii. statistics is the science of measurement of social

organism regarded as a whole in all its manifestations.
 • Croxton and cowden have defined statistics as
science of collecting, presentation, analysis, and
interpretation of numerical data.

• Statistics is defined as the science of estimates and

Con….. probabilities “Boddington”.

Generally for our purpose statistics is defined as
methods specially adapted to the collection,
classification, analysis, and interpretation of data for
making effective decisions in all functional areas of
management.
 Statistics can be classified in to two major categories;

1. Descriptive Statistics

• It includes statistical methods involving the collection,

presentation, and characterization of a set of data in order to
Types of describe the various features of the set of data.

statistics • Method of descriptive statistics includes:

• graphic methods (like bar graph, line graph, pie chart, o-

give chart…) and
• numerical measures (such as measure of central
tendency/mean, median, mode etc.) and measures of
dispersion(variance, co-variance and standard deviation).
 Con……
2. Inferential statistics

• Is the process of reaching generalizations about the whole (called the population) by

examining a portion (called the sample).

• It is used to predict the future possibilities.

• In order for this to be valid, the sample must be representative of the population and the

probability of error also must be specified.

• It includes point estimation, interval estimation and hypothesis testing.

 Caution: Inferential Statistics assumes that the sampling methodology is random (i.e.

based on probability sampling).

 Some key terms in statistics

 Population - is the collection of all possible observations of a specified characteristic of interest.

 Sample – is the portion or part of the population of interest.

 Element – entity on which data are collected.

 Census or complete enumeration: - a study that includes every member of the target
population, but it is too costly & time consuming.

 Parameter – is the population characteristics of interest.

 Statistic – is the characteristics of sample.

 Variable- is a characteristic that assumes different values for different elements.

 Types of Data

A. Based on quantifiable
 Qualitative Data - are non-numeric in nature and can't be measured. Examples are
gender/sex, color, religion, nationality, marital status and place of birth.
 Quantitative Data - are numerical in nature and can be measured. Examples are height,
weight, amount of rain fall, age, balance in your savings bank account and number of
computers in a given class. Quantitative data can be classified into discrete and
continuous type.
 Discrete type - values are obtained by counting, and the possible values are (0, 1, 2, 3,
4, 5, 6, 7, 8 …) which cannot be in fraction.
 Continuous type – determined by measurement and its value include decimal values.
Such as, distance between two towns, weight of a person, height …etc
 Con….
B. Based on data source

 Primary data: - are data which do not already exist in any form, and thus have to be collected

for the first time from the primary source(s). By their very nature, these data require fresh

and first-time collection covering the whole population or a sample drawn from it.

The benefits of primary data are that they fit the needs exactly, are up to date, and

reliable/genuine/. And its disadvantage is it is costly and time taking.

 Secondary data: - are those which have already been collected by some one else and which

have already passed through the statistical process. They already exist in some form:

published or unpublished - in an identifiable secondary source. Secondary data have the

advantages of being much cheaper and faster to collect. And its disadvantage is it is not
 C. Based on the time data collected
 Cross sectional data: - this is data collected at the
same time or one particular point in time on different
elements.
 For example, sales made at the same point in time but at
Con…. different market places.

 Time series (longitudinal) data: - this is data collected

at several points in time from the same study objects or
units.
 It helps to see increasing or decreasing trends over time.

 For example, sales data for different periods.

 • Nominal data

 The weakest data measurement. Under nominal data numbers are used
only for coding and labeling /categorizing nominal data/items.

 For example; nominal data includes gender (while we are collecting data
we may represent, 0= male and 1 = female).
Types of data
• Ordinal data
measurement
 numbers are used to order and rank data. Ordinal data can also be
verbalized on a continuum like excellent, very good, good, fair and
poor.

 For example; Customer Preference for your brand could be rated as

excellent, good and poor.
 • Interval data
Interval data are superior to ordinal data because with them
decision makers can measure the distance between two
observations (i.e., the difference between value of interval
has meaning).
Temperature is a typical example of interval data, it is
Con….. expressed as cool (5 - 15), moderate (16 - 26, and high (27
– 37).

• Ratio data
It is the highest level of measurement and allows you to
perform all basic arithmetic operations, including
division, multiplication, logarithm, and power.
Cont…
• Con…
 1. Marketing

• Before the new product is launched, the market research team of an

organization, through a pilot survey, use various techniques to
analyze data on population; purchasing power, competitors, habits
Application areas of consumers, pricing and advertising strategies.
of statistics
2. Production

• Statistical methods are used to carry out R&D programs for

improvement in the quality of the existing products, identifying and
rejecting defective or substandard goods and setting quality control
standards for new ones and also, decision about
manufacturing/buying raw materials for production.
 3. Finance
 A statistical technique through correlation analysis of profit

dividend helps to predict and decide probable dividend for

future years.

 In addition, the level of expense for advertising and sales

Con…. volume also determined by using statistics.

4. Personnel

 In the process of man power planning, a personnel department

makes statistical studies of wage rate, incentive plans, cost of

living, and labor turnover rate, employment trends, accident

rates, performance appraisal, training and development.

  Statistics has a number of limitations, pertinent among them
are as follows:
 Statistical results are true only on average.

 i.e. reveal the average behavior, the normal or the

general trend
 Statistics deals with aggregate.
Limitation  an individual observation cannot be considered as
of statistics statistics.
 The difference between the true value and the estimated
value are not the same /bias.
 Misuse of statistics

 statistical results may be misused knowingly or

unknowingly, in different ways.
  Depending on their coverage, statistical investigations

are usually carried out either in the form of census or

sample survey.
Scope of 1. Census
Statistical  A census is the one in which all the units
Investigation connected with the problem are taken into account.
 Complete enumeration is the basic characteristic of

census.
 In census approach data is gathered from each and

every member in the population (universe).

 Advantage of census

• Information is available for each separate part of the

universe.
• The results to be obtained are likely to be more
representative, accurate and reliable.
• It serves as a basis for various surveys, because it is

Con….. free from sampling error.

• Easier to check and reduce coverage error.

Limitation of census

• It requires very large effort, money and time.

• In case where the population is infinite, census
approach can’t be applied.
 2. Sample survey
• Sample survey refers to the collection of information
about a variable of interest from only some part (or
subset) of the population called sample.
Con…. • Sample elements are selected from a population
through different alternative sampling techniques.
• In sample survey only some selected representative
units are studied.
 Advantages of sample survey

• It reduces cost
• It saves labor.
• It enables advanced tabulation of selected topics.
• Sometimes conducting a sample survey is the only option for study.
• Sample survey may be used to test census procedures and updating
Con
census results.
….
Limitation of sample survey

• Requires trained personnel for data collection purpose.

• Does not give reliable results without careful planning and design.
• It has the task of sample size determination and sample selection.
• Sample survey involves sampling error.
 UNIT TWO
DATA COLLECTION AND
PRESENTATION
 • Nowadays most executives and other decision makers
pass effective decisions based on research findings.
• Most research in different areas of study require data so as
to generate valuable information that facilitate the
decision-making process.
Introduction • Data are raw materials for research. Moreover, the quality
of the collected data greatly affects or determines the
precision of results to be obtained from a specific
investigation.
• Therefore, it is extremely important to know about the
basics of data collection.
 • Collection of data implies a systematic and meaningful assembly of
information for the accomplishment of the objective of a statistical
investigation.
Meaning of
• It refers to the methods used in gathering the required information
Data Collection
from the units under investigation.
Methods of collecting primary data
•Many authors commonly state three methods of collecting primary
data. These are:
a. Personal Enquiry Method (Interview method)
 Direct Personal Interview
 Indirect Personal Interview
b. Direct Observation
c. Questionnaire method
 Con….
The following are the major points that we need to take into account while preparing a
questionnaire.
 The number of questions should be small.
 The questions should be short, clear, simple, and unambiguous.
 Questions of sensitive nature should be avoided.
 Questions should be capable of objective answers.
 Mail questionnaires should be accomplished by a covering letter, which should state the
purpose of the questionnaire, promise of confidentiality of responses, etc.
 Furthermore, the questions preferably designed in such a way can easily be answered as
yes/no
 Classification:
• is the process of arranging things in groups or
classes according to their resemblance.
• It is difficult to group the meaning of any
considerable volume of numerical data unless their
mass is some hours reduced to relatively few
Classification convenient classes or categories and presented
with the help of some kinds of visual aid.
of Data and Purposes of Classification:
Presentation • To eliminate unnecessary detail.
• To bring out clearly points of similarity &
dissimilarity
• To enable one to form mental pictures of objects
on measurements
• To enable one to make comparisons and draw
inferences
 Geographical Classification: - Data are arranged
according to places like continents, regions, and
countries.

Chronological Classification: - Data are arranged

according to time like year, month.

TYPES OF
CLASSIFICATION
Qualitative Classification: - Data are arranged
according to attributes like color, religion, marital-
status, sex, educational background, etc.

Quantitative Classification: - In this type of

classification, the statistical data is classified
according to some quantitative variables. The
variable may be either discrete or continuous.
  When the raw data have been collected, they should be put into an
ordered array in an ascending or descending order so that it can be
looked at more objectively.

 Then this data must be organized in to a “FD” which simply lists the
values or classes with their corresponding frequencies in a tabular
Frequency form.
Distribution (FD)  Here, frequency refers to the number of observations a certain
value occurred in a data.

 The tabular representation of values of a variable together with the

corresponding frequency is called a Frequency Distribution (FD).

 A frequency distribution is the organization of raw data in table form,

using classes and frequencies. Frequency distribution is of two kinds
 A. Ungrouped Frequency Distribution (UFD)
 Shows a distribution where the values of a variable are linked with the
respective frequencies.
 Example1: Consider the number of children in 15 families and its
ungrouped FD.
1 0 3 2 0
2 4 1 3 1
Con…. 4 1 2 2 3
 Con…

B. Grouped Frequency Distribution (GFD)

 If the mass of the data is very large, it is necessary to condense the data into an appropriate
number of classes or groups of values of a variable and indicate the number of observed values
which fall into each class.
 Therefore, a GFD is a frequency distribution where values of a variable are linked into groups &
corresponded with the number of observations in each group.
 Example 2 Values (xi) 1 – 25 26 - 50 51 - 75 76 - 100

Frequency (fi) 3 10 18 6
 Common Terminologies in a GFD
Class

 group of values of a variable between two

specified numbers called lower class limit (LCL) &
upper-class limit (UCL)
 In Example 2, the GFD contains four classes:
1 – 25, 26 – 50, 51 – 75, and 76 – 100
Values (xi) 1 – 25 26 - 50 51 - 75 76 - 100
LCL1 = 1, UCL1 = 25 LCL3 = 51, UCL3 = 75
LCL2 = 26, UCL2 = 50 LCL4 = 76, UCL4 = 100
Frequency (fi) 3 10 18 6
Class Frequency (or Simply Frequency)

 Refers to the number of observations

corresponding to a class.
 In Example 2, the class frequency of the 1st, 2nd, 3rd,
& 4th classes are respectively 3, 10, 18 and 6.
 Con….
Class Boundaries: are boundaries obtained by subtracting half of the unit of measurement (u) from the lower
limits or by adding ½ (u) on the upper limits of a class.
Values (xi) 1 – 25 26 - 50 51 - 75 76 - 100
i.e. UCBi = UCLi + ½ (u)

LCBi = LCLi - ½ (u)

Frequency 3 10 18 6
Where UCBi = Upper Class Boundaries and
(fi)
LCBi = Lower Class Boundaries
Remark: The unit of measurement (u) is the gap between any two successive classes.
i.e. U = lower limit of a class – upper limit of the preceding class.
In Example 2, consider the 2nd class, 26 – 50, since u = 26 – 25 = 1,
LCL2 = 26 UCL2 = 50

LCB2 = 26 - ½ (1) = 25.5 UCB2 = 50 + ½ (1) =50.5

 Con…. Values (xi) 1 – 25 26 - 50 51 - 75 76 - 100

Class Width (size of a class or class interval) Frequency (fi) 3 10 18 6

 it is the difference between the upper- and lower-class limits or the difference between the upper- and
lower-class boundaries of any class.
 Remarks:
 If both the LCL & UCL are included in a class, it is called an inclusive class. For inclusive classes,

Class width (cw) = UCBi - LCBi

 If LCL is included and the UCL is not included in a class, it is called an exclusive class. For
exclusive classes
Cw = UCLi – LCLi
 To be consistent, we use inclusive classes.
 Con…...
Class Mark (cm)

 it is the mid-point (center) of a class

 Note: - the difference between any two successive class marks is equal to the
width of a class
Range (R)
 is the difference between the largest (L) and the smallest (S) values in a data
R=L–S
 1. There should be between 5 and 20 classes.
2. The classes must be mutually exclusive. This means that
no data value can fall into two different classes
Rules for forming 3. The classes must be all inclusive or exhaustive. This
a Grouped
means that all data values must be included.
Frequency
4. The classes must be continuous. There are no gaps in a
Distribution
(GFD) frequency distribution.
5. The classes must be equal in width. The exception here
is the first or last class. It is possible to have a
"below ..." or "... and above" class. This is often used
with ages.
 .
Steps for constructing Grouped frequency Distribution
.
.
Find the largest and smallest values
Compute the Range (R) = Maximum - Minimum
Select the number of classes desired, usually between 5 and 20 or use
Sturges rule where k is number of classes desired and n is total
number of observations.
Find the class width by dividing the range by the number of classes and
rounding up, not off.
Pick a suitable starting point less than or equal to the minimum value. The starting
point is called the lower limit of the first class. Continue to add the class width to this
lower limit to get the rest of the lower limits.
 Con….

To find the upper limit of the first class, subtract U from the lower limit of the second
class. Then continue to add the class width to this upper limit to find the rest of the
upper limits.
Find the boundaries by subtracting U/2 units from the lower limits and adding U/2
units from the upper limits. The boundaries are also half-way between the upper limit
of one class and the lower limit of the next class.! may not be necessary to find the
boundaries.
Find the frequencies.
 The number of customers for consecutive 30 days in a

Example: supermarket was listed as follows:

Solution:
Con.
Therefore, the GFD would be
 Presentation of Data
Write and discuss data presentation in detail through the
following presentation methods.
Group 1. HISTOGRAM
Assignment 2. FREQUENCY POLYGON
(15%) 3. CUMULATIVE FREQUENCY CURVE,
(OGIVE)
4. LINE GRAPH
5. VERTICAL LINE GRAPH
6. BAR CHART (BAR DIAGRAM)
7. PIE CHART
8. PICTOGRAPH (PICTOGRAM)