Business Statistics

Introduction :

Statistics Definition: Statistics is a branch that deals with every aspect of the
data. Statistical knowledge helps to choose the proper method of collecting the
data and employ those samples in the correct analysis process in order to
effectively produce the results. In short, statistics is a crucial process which
helps to make the decision based on the data.

Statistics Example
An example of statistical analysis is when we have to determine the number of people
in a town who watch TV out of the total population in the town. The small group of
people is called the sample here, which is taken from the population.

Types of Statistics
The two main branches of statistics are:

● Descriptive Statistics
● Inferential Statistics

Descriptive Statistics – Through graphs or tables, or numerical calculations,

descriptive statistics uses the data to provide descriptions of the population.

Inferential Statistics – Based on the data sample taken from the population,
inferential statistics makes the predictions and inferences.

Both types of statistics are equally employed in the field of statistical analysis.
Variables

Definition

A variable is any characteristic, number, or quantity that can be measured or

counted. A variable may also be called a data item. Age, sex, business income

and expenses, country of birth, capital expenditure, class grades, eye colour and

vehicle type are examples of variables. It is called a variable because the value

may vary between data units in a population, and may change in value over

time.

For example; 'income' is a variable that can vary between data units in a

population (i.e. the people or businesses being studied may not have the same

incomes) and can also vary over time for each data unit (i.e. income can go up

or down).

Types of variables
There are different ways variables can be described according to the ways

they can be studied, measured, and presented.

Numeric variables

Numeric variables have values that describe a measurable quantity as a

number, like 'how many' or 'how much'. Therefore numeric variables are

quantitative variables.
Numeric variables may be further described as either continuous or discrete:

● A continuous variable is a numeric variable. Observations can take any value

between a certain set of real numbers. The value given to an observation for a
continuous variable can include values as small as the instrument of
measurement allows. Examples of continuous variables include height, time,
age, and temperature.
● A discrete variable is a numeric variable. Observations can take a value based
on a count from a set of distinct whole values. A discrete variable cannot take
the value of a fraction between one value and the next closest value. Examples
of discrete variables include the number of registered cars, number of business
locations, and number of children in a family, all of of which measured as
whole units (i.e. 1, 2, 3 cars).

The data collected for a numeric variable are quantitative data.

Categorical variables

Categorical variables have values that describe a 'quality' or 'characteristic' of a data

unit, like 'what type' or 'which category'. Categorical variables fall into mutually

exclusive (in one category or in another) and exhaustive (include all possible options)

categories. Therefore, categorical variables are qualitative variables and tend to be

represented by a non-numeric value.

Categorical variables may be further described as ordinal or nominal:

● An ordinal variable is a categorical variable. Observations can take a value that

can be logically ordered or ranked. The categories associated with ordinal
variables can be ranked higher or lower than another, but do not necessarily
establish a numeric difference between each category. Examples of ordinal
categorical variables include academic grades (i.e. A, B, C), clothing size (i.e.
 small, medium, large, extra large) and attitudes (i.e. strongly agree, agree,
disagree, strongly disagree).
● A nominal variable is a categorical variable. Observations can take a value that
is not able to be organised in a logical sequence. Examples of nominal
categorical variables include sex, business type, eye colour, religion and brand.

The data collected for a categorical variable are qualitative data.

Types of variables flowchart

Levels of Measurement | Nominal,

Ordinal, Interval and Ratio
Published on July 16, 2020 by Pritha Bhandari. Revised on June 21, 2023.
Levels of measurement, also called scales of measurement, tell you how precisely

variables are recorded. In scientific research, a variable is anything that can take on

different values across your data set (e.g., height or test scores).

There are 4 levels of measurement:

● Nominal: the data can only be categorised

● Ordinal: the data can be categorised and ranked

● Interval: the data can be categorised, ranked, and evenly spaced

● Ratio: the data can be categorised, ranked, evenly spaced, and has a natural

zero.

Depending on the level of measurement of the variable, what you can do to analyze

your data may be limited. There is a hierarchy in the complexity and precision of the

level of measurement, from low (nominal) to high (ratio).

Table of contents

1. Nominal, ordinal, interval, and ratio data

2. Why are levels of measurement important?

3. Which descriptive statistics can I apply on my data?

4. Quiz: Nominal, ordinal, interval, or ratio?

5. Other interesting articles

6. Frequently asked questions about levels of measurement

Nominal, ordinal, interval, and ratio data

Going from lowest to highest, the 4 levels of measurement are cumulative. This

means that they each take on the properties of lower levels and add new properties.
Nominal level Examples of nominal scales

You can categorise your data by labelling them in mutually ● City of birth

exclusive groups, but there is no order between the ● Gender

categories. ● Ethnicity

● Car brands

● Marital status

Ordinal level Examples of ordinal scales

You can categorise and rank your data in an order, but you ● Top 5 Olympic

cannot say anything about the intervals between the medallists

rankings. ● Language ability (e.g.,

beginner, intermediate,

Although you can rank the top 5 Olympic medallists, this fluent)

scale does not tell you how close or far apart they are in ● Likert-type questions

number of wins. (e.g., very dissatisfied to

very satisfied)
Interval level Examples of interval scales

You can categorise, rank, and infer equal intervals between ● Test scores (e.g., IQ or

neighbouring data points, but there is no true zero point. exams)

● Personality inventories

The difference between any two adjacent temperatures is ● Temperature in

the same: one degree. But zero degrees is defined Fahrenheit or Celsius

differently depending on the scale – it doesn’t mean an

absolute absence of temperature.

The same is true for test scores and personality inventories.

A zero on a test is arbitrary; it does not mean that the

test-taker has an absolute lack of the trait being measured.

Ratio level Examples of ratio scales

You can categorise, rank, and infer equal intervals between ● Height

neighbouring data points, and there is a true zero point. ● Age

● Weight

A true zero means there is an absence of the variable of ● Temperature in Kelvin

interest. In ratio scales, zero does mean an absolute lack of

the variable.

For example, in the Kelvin temperature scale, there are no

negative degrees of temperature – zero means an absolute

lack of thermal energy.

Uses of statistics in business 👍
One can understand the importance of Statistics in business from the following:
(i) Marketing - Statistical analysis is frequently used in providing information for
making decisions in the field of marketing. It is necessary first to find out what can
be sold and then to evolve a suitable strategy, so that the goods reach the ultimate
consumer. A skilful analysis of data on production purchasing power, man power,
habits of consumers, habits of consumer, transportation cost should be considered to
take any attempt to establish a new market.
(ii) Production - In the field of production statistical data and methods play a very
important role. The decision about what to produce, how to produce, when to
produce, and for whom to produce is based largely on statistical analysis.
(iii) Finance - The financial organisation discharging their finance function
effectively depends very heavily on statistical analysis of peat and tigers.
(iv) Banking - Banking Institute has found it increasingly necessary to establish a
research department within their organisation for the purpose of gathering and
analysing information, not only regarding their own business but also regarding the
general economic situation and every segment of business in which they may have
interest.
(v) Investment - Statistics greatly assists investors in making clear and valued
judgement in his investment decision in selecting securities which are safe and have
the best prospects of yielding a good income.
(vi) Purchase - The purchasing department in discharging their function makes use
of statistical data to frame suitable purchase policies such as what to buy; What
quantity to buy; What time to buy; Where to buy; Whom to buy;
(vii) Accounting - Statistical data are also the employer in accounting particularly in
auditing function, the technique of sampling and destination is frequently used.
(viii) Control - The management control process combines statistical and accounting
methods in making the overall budget for the coming year including sales, materials,
labour and other costs and net profits and capital requirement.