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03/03/2015
Statistics For management
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BY: SAMRAWIT T.(BA,MBA)

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N E
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Chapter objectives

 After completing this unit, students will be

able to:
 Define Statistics
 Identify Classification of Statistics.
 Identify Classification of variables.
 Understand Importance of statistics
 Understand Business application of Statistics

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1.1 Definition of
Statistics
 The term Statistics is defined in a number of ways, all the definitions
cover two basic aspects.
 That is, statistics may be defined as statistical data (plural sense) or it
can also be defined as a method (singular sense). Each one of these
definitions is treated separately as follows.
 Statistics defined as data
 It is an aggregate or collection of numerical facts.
 According to this, Prof. Horace Secrist gives the following
definition:
 “Statistics refer to the aggregates of facts affected to a marked
extent by 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.”
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 Statistics defined as a method 5
 The second definition of Statistics refers to the
science or the methods of Statistics.
 It is also in the sense of its second definition that we
consider Statistics as a subject.
 Statistics is defined as the art and science of
 collecting, organizing, presenting, analyzing,
and interpreting a group of numbers or
observations for the purpose of assisting
sound decision making.
 Particularly in business and economics, the
information provided by collecting,
analyzing, presenting, and interpreting data
gives managers and decision makers a better
understanding of the business and economic
environment and thus enables them to make
more informed and better decisions` 04/14/2025
 Statistics is concerned with the development and application of processes,
methods, and techniques for
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 Collection of data: the process of measuring, gathering, assembling the raw
data up on which the statistical investigation is to be based.
 Organization of data: The volume of collected data is a large quantity of
figures which requires organization.
 Organizing data involves editing and checking for omissions, for irrelevant
answers or for wrong computations before selecting and designing the
appropriate methods for data presentation.
 Summarization of data in some meaningful way.
 Presentation of the data: The collected data are presented in a tabular or
graphic form. This systematic order and graphical presentation helps in the
further analysis of the data.

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 Cont.… 7

 Analysis of data: Analysis of data is the summarizing of trends and patterns

observed in the data, the review of major differentials, and the computation
of indexes which are used in determining relationships among variables used
in a study.
 The process of extracting relevant information from the summarized data,
mainly through the use of elementary mathematical operation.
 Inference of data: The interpretation and further observation of the various
statistical measures through the analysis of the data by implementing those
methods by which conclusions are formed and inferences made.
 Interpretation uses the results of the data analysis to make inferences
relevant to the research questions.
 It seeks a broader meaning of the research relations obtained, as well as their
implications, thus linking them to other relevant available knowledge.
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Definition of Some
Statistical Terms
 Statistical Population: It is the collection of all possible
observations of a specified characteristic of interest (possessing
certain common property) and being under study. It Use
parameters to summarize features. An example is all of the
students in IU.
 Sample: It is a subset of the population; selected using some
sampling technique in such a way that they represent the
population. It uses statistic to summarize features.
 Sampling: The process or method of sample selection from the
population.
 Sample size: The number of elements or observation to be
included in the sample.
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 Census: Complete enumeration or observation of the elements of the
population. Or it is the collection of data from every element in a 9
population.
 Parameter: Characteristic or measure obtained from a population.
 Statistic: Characteristic or measure obtained from a sample.
 Variable: It is an item of interests that are measured and can take on
many different numerical values.
 A variable is a characteristic or attribute that can assume different
values.
 Data: The facts and figures collected, analyzed, and summarized for
presentation and interpretation. Measurements or observations that a
variable can assume.
 A datum (singular) is a single measurement or observation, usually
referred to as a score or raw score.

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1.2. Classification of 10
Statistics
 Statistics can be classified into two based on how data are
used: descriptive and inferential.
 Descriptive statistics refers to the procedures used to
organize and summarize masses of data and make sense of a
set of scores or observations.
 It Summarizes and describes the features of a dataset.
 Deals only with describing some characteristics of the data collected
without going beyond the data.
 It comprises the first three stages of statistical investigation namely:
collection, organization and presentation of data.
 Are typically presented graphically, in tabular form (in tables), or as
summary statistics (single values).
 Summarize data to make sense or meaning of a list of numeric values.
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 The frequency distribution 11
 measures of central tendency such as
 Mean and median, mode
 Measures of dispersion such as
Range, Variance and standard deviation belongs
to this category of statistics.
 For example, upon looking around your class, you
may find that 35% of your fellow students are
wearing Casio watches.
 If so, the figure “35%” is a descriptive statistic. You are
not attempting to suggest that 35% of all university
students, or even at your school, wear Casio watches.
 You’re merely describing the data that you’ve recorded.

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 Inferential statistics: are procedures used that allow researchers to 12
infer or generalize observations made with samples to the larger

population from which they were selected.

 Is Makes inferences and predictions about a population based
on a sample.
 Used Hypothesis testing, confidence intervals, regression analysis.
 Is concerned with drawing statistically valid conclusions
about the characteristics of the population based on
information obtained from a sample.
 It is the part of statistics that is
 Generalizing from sample to population using
probabilities,
 Performing hypothesis testing,
 Determining relationships between variables, and
 Making predictions. 04/14/2025
 Ituse the characteristics in a sample to infer 13
what the unknown parameters are in a given
population.
 It includes the methods used to find out
something about the population, based on a
sample.
 In this form of statistical analysis descriptive
statistics is linked with probability theory so
that an investigator can generalize the result
of the study of a few individuals to some
larger group.

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1.3. Classification of

Variables
There are two basic types of variables: qualitative and quantitative
Qualitative variable is a variable in which the characteristic or variable being studied is
non-numeric.
 Variables that represent categories or qualities and cannot be measured numerically.
 Use labels or names to identify categories of like items.
 Is a variable that can be described in words.
Example: gender, color, religion, ethnic group etc.
 It is a variables that can be placed into distinct categories, according to some
characteristic or attribute.
 For example, if subjects are classified according to gender (male or female), then
the variable gender is qualitative.
 Other examples of qualitative variables are religious preference and geographic
locations.
 Are often summarized in charts and bar graphs
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Contd..
 Quantitative variable is a variable that can be expressed numerically or are
variables that are numeric in nature.
 It is numerical values that indicate how much or how many.
 For example, the variable age is numerical, and people can be ranked in
order according to the value of their ages.
 Other examples are heights, weights, and body temperatures.
 Quantitative variables can be further classified into two
groups: discrete and continuous.
 Discrete variables.
 Continuous variables.

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 Discrete variables: is a variable that assumes a finite or
countable number of possible values.
 Assumes values that can be counted.
 Can be assigned values such as 0, 1, 2, 3 and are said to be
countable.
 They cannot have 2.3 student in the room. One of the
distinguishing features of discrete variable is that gaps exist
between possible values.
 Is usually obtained by counting.
Example
 the number of students in a classroom,
 number of children’s in a family
 the number of calls received per day obtained by counting.
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Cont.…
 Continuous variables,
 Can assume an uncountable and infinite number of values in an interval between any two specific
values, represented by an interval on the number line.
 Examples of continuous variable
 Length,
 weight
 Time
 Temperature
 Can assume an infinite number of values between any two specific values.
 They are obtained by measuring.
 They often include fractions and decimals.
 continuous variables are real numbers, we usually round them.
 This implies a boundary depending on the number of decimal places. For example: 64 is really
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anything 63.5 ≤ x < 64.5.
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Levels (scale) of

Measurement of Data
In addition to being classified as qualitative or quantitative, variables can be
classified by how they are categorized, counted, or measured.
 For example,
 Can the data be organized into specific categories, such as area of
residence (rural, suburban, or urban)?
 Can the data values be ranked, such as first place, second place, etc.? Or
are the values obtained from measurement, such as heights, IQs, or
temperature?
 This type of classification—i.e., how variables are categorized, counted,
or measured—uses measurement scales.
NB; Assigning a numerical value to a variable is a process called
measurement.
 Data collection requires one of the following scales of 04/14/2025

measurement: nominal, ordinal, interval, or ratio.

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 The scale to which the measurements belong will be
important in determining appropriate methods for data
description and analysis.
 In all, scales of measurement are characterized by three
properties: order, differences, and ratios.
 Order: Does a larger number indicate a greater value than
a smaller number?
 Differences:Does subtracting two numbers represent
some meaningful value?
 Ratio: Does dividing (or taking the ratio of) two numbers
represent some meaningful value

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I. Nominal Data: 20
 Are categorical or qualitative data that are converted into numerical
data by coding the various categories.
 These are numerical in name only; because the numbers assigned
are more symbols and hence cannot have any numerical meaning in
the real sense.
 There is no any mathematical difference between categories.
 Coding is largely done because it is often easier to compute data
using statistical programs, such as SPSS, when data are entered
as numbers, not words.
 Coding refers to the procedure of converting a nominal value to
a numeric value.
 Examples:
 Sex of a person (male and female could be coded as 0 and 1).
 Marital status (Single, married, divorced and widowed as 1, 2, 3 and 4).
 Phone numbers could be coded as 0581111111, 0111550119, etc.
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II. Ordinal Data: are nominal data, which have order.
 Measurements with ordinal scales are ordered in the sense that higher
numbers represent higher values, i.e., they can have meaningful
inequalities (< or >).
 In such kind of data, only counting and ranking are possible but it is
not likely to find exact differences.
 Examples:
 Graduates of a university with distinct programs (Diploma, Degree,
Masters and PhD)
 Linkers scale such as 1= poor, 2= fair, 3= good and 4= excellent.

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III. Interval Data:
 Data values can be ranked and the differences between data values are meaningful and
the data are always numerical.
 An interval data have all the properties of ordinal data and the interval between values is
expressed in terms of a fixed unit of measure.
 However, there is no intrinsic or true zero, or starting point, and the ratio of data values
are meaningless and it is not possible to make statements about how many times higher
one score is than other.
 It includes all the characteristics of the ordinal level, but in addition, the difference
between values is a constant size.
 An example of the interval level of measurement is temperature. Suppose the high
temperatures on three consecutive winter days are 28, 31, and 25degrees Fahrenheit.

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Cont.…
 These temperatures can be easily ranked, but we can also determine
the difference between temperatures.
 This is possible because 1 degree Fahrenheit represents a constant
unit of measurement.
 Equal differences between two temperatures are the same,
regardless of their position on the scale.
 That is, the difference between 10 degrees Fahrenheit and 15
degrees is 5, the difference between 50 and 55 degrees is also 5
degrees.
 It is also important to note that 0 is just a point on the scale. It does
not represent the absence of the condition. Zero degrees Fahrenheit
does not represent the absence of heat, just that it is cold! 04/14/2025
IV. Ratio Data:
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Interval data, which also have true zero point. With these data, one
can perform addition, subtraction, division and multiplication.
 A true zero is defined and it is truly means nothing.
 Examples include business data, such as cost, revenue, market share and
profit.
 Practically all quantitative data are the ratio level of
measurement.
 The ratio level is the "highest" level of measurement.
 It has all the characteristics of the interval level, but in addition,
the 0 point is meaningful and the ratio between two numbers is
meaningful.
 Examples of the ratio scale of measurement include: wages,
units of production changes in stock prices, distance between
branch offices, and height. Money is a good illustration. If
you have zero dollars, then you have no money.
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 The difference between interval and ratio 25
measurements can be confusing. The fundamental
difference involves the definition of a true zero and
the ratio between two values.
 If you have $50 and your friend has $100, then your friend
has twice as much money as you. You may convert this
money to Japanese yen or English pounds, but your friend
will still have twice as much money as you. If you spend
your $50, then you have no money. This is an example of a
true zero.
 As another example, a sales representative travels 250 miles
on Monday and 500 miles on Tuesday. The ratio of the
distances traveled on the two days is 2/1; converting these
distances to kilometers, or even inches, will not change the
ratio. It is still 2/1. Hence, the variable distance has a true
zero point.

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1.4. Importance (uses) of

statistics
The main function of statistics is to enlarge our knowledge of complex
phenomena. The following are some uses of statistics:
 It presents facts in an exact and precise form.
 Data reduction.
 Measuring the magnitude of variations in data.
 Furnishes a technique of comparison
 Estimating unknown population characteristics.
 Testing and formulating of hypothesis.
 Studying the relationship between two or more variable.
 Forecasting future events.

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1.5 Application Of Statistics In
Business And Economics

 In today’s global business and economic

environment, anyone can access vast amounts of
statistical information.
 The most successful managers and decision
makers understand the information and know
how to use it effectively.

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Area Decision Situation Statistical techniques
applicable
Marketing  Assessment/Forecast of demand for  Time series.
the product or service.  Correlation and
 Customer profiling Market Research. regression.
 Cluster analysis.
 Conjoint Analysis.
 Identifying Customer Buying
 Multidimensional
Behaviors and Patterns
Analysis.
Finance and Banking  Evaluation of Investment.  Regression analysis.
 Volatility of stocks.  Decision Analysis.
 Predicting Earning Per share.  Beta analysis.
 Derivatives.
Insurance  Determining Premium.  Profitability Analysis.
 Time series Analysis.
 Regression Analysis.
Operations  Controlling and Improving  Statistical Quality
Production. Control.
 Process and quality.  Six Sigma.
 Inventory management.  Sampling Inspection.
 ABC Analysis.
Human Resource  Performance appraisal and Reward  Normal Distribution
Development system.  Percentiles.
Economics  forecasts about the future of the  Regression and
economy Correlation Analysis.
Accounting  Conducting audits for their clients.  Profitability 04/14/2025
Analysis.
 Time series Analysis.
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FINISHED
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