Basic Business Statistics

12th Edition

Chapter 1

Introduction

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 Learning Objectives

In this chapter you learn:

• How businesses use statistics

• The basic vocabulary of statistics
• The types of data used in business
• How to use Microsoft Excel with this
book
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Chap 1-2
 What is Statistics?
Statistics
• The branch of mathematics that transforms data into
useful information for decision makers.

Why Learn Statistics?

• First and foremost, statistics helps you make better
sense of the world.
• Second, statistics helps you make better business
decisions.
• Statistics lets you know about the risks associated with
making a business decision and allows you to
understand and reduce the variation in the decision-
making process.
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Chap 1-3
 Two Different Branches Of
Statistics Are Used In Business

Statistics

Descriptive Statistics Inferential Statistics

Collecting, summarizing, Using data collected from a

presenting and analyzing data small group to draw conclusions
about a larger group

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Chap 1-4
 Descriptive Statistics

• Collect data
– e.g., Survey

• Present data
– e.g., Tables and graphs

• Characterize data
– e.g., The sample mean

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Chap 1-5
 Inferential Statistics
• Estimation
– e.g., Estimate the population
mean weight using the sample
mean weight
• Hypothesis testing
– e.g., Test the claim that the
population mean weight is 120
pounds

Drawing conclusions about a large group of

individuals based on a smaller group.
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Chap 1-6
 These Two Branches Are Used In
The Important Activities
• To summarize business data
– Descriptive methods used to create charts & tables
• To draw conclusions from business data
– Inferential methods used to reach conclusions about
a large group based on data from a smaller group
• To make reliable forecasts about business
activities
– Inferential methods used to develop, quantify, and
improve the accuracy of predictive models
• To improve business processes
– Involves managerial approaches like Six Sigma

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 Basic Vocabulary of Statistics

VARIABLES
Variables are characteristics of an item or individual and are what you
analyze when you use a statistical method.

DATA
Data are the different values associated with a variable.

OPERATIONAL DEFINITIONS
Data values are meaningless unless their variables have operational
definitions, universally accepted meanings that are clear to all associated
with an analysis.

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Chap 1-8
Basic Vocabulary of Statistics

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 Basic Vocabulary of Statistics
POPULATION
A population consists of all the items or individuals about which
you want to draw a conclusion. The population is the “large
group.”

SAMPLE
A sample is the portion of a population selected for analysis. The
sample is the “small group.”

PARAMETER
A parameter is a numerical measure that describes a characteristic
of a population.

STATISTIC
A statistic is a numerical measure that describes a characteristic of
a sample. Copyright ©2012 Pearson Education,
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 Population vs. Sample
Population Sample

Measures used to describe the Measures used to describe the

population are called parameters sample are called statistics
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 This Book Is Organized To Show The Four
Uses Of Statistics
• To summarize business data (Chapters 2 & 3)

• To draw conclusions from business data (Chapters

4 – 12)

• To make reliable forecasts about business

activities (Chapters 13 – 16)

• To improve business processes (Chapter 18)

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 Types of Variables
 Categorical (qualitative) variables have
values that can only be placed into categories,
such as “yes” and “no.”

 Numerical (quantitative) variables have

values that represent quantities.
 Discrete variables arise from a counting process
 Continuous variables arise from a measuring
process

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 Types of Variables

Variables

Categorical Numerical

Examples:
 Marital Status
 Political Party Discrete Continuous
 Eye Color
(Defined categories) Examples: Examples:
 Number of Children  Weight
 Defects per hour  Voltage
(Counted items) (Measured characteristics)
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Chap 1-14
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 Levels of Measurement

A nominal scale classifies data into distinct

categories in which no ranking is implied.
Categorical Variables Categories

Personal Computer Yes / No

Ownership

Type of Stocks Owned Growth / Value / Other

Internet Provider Microsoft Network / AOL/ Other

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Levels of Measurement (con’t.)
An ordinal scale classifies data into distinct
categories in which ranking is implied

Categorical Variable Ordered Categories

Freshman, Sophomore, Junior,

Student class designation
Senior

Product satisfaction Satisfied, Neutral, Unsatisfied

Professor, Associate Professor,

Faculty rank
Assistant Professor, Instructor
AAA, AA, A, BBB, BB, B, CCC, CC,
Standard & Poor’s bond ratings
C, DDD, DD, D

Student Grades A, B, C, D, F
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 Levels of Measurement (con’t.)
 An interval scale is an ordered scale in which
the difference between measurements is a
meaningful quantity but the measurements do
not have a true zero point.

 A ratio scale is an ordered scale in which the

difference between the measurements is a
meaningful quantity and the measurements
have a true zero point.

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Chap 1-18
Interval and Ratio Scales

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Chap 1-19
Levels of Measurement

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Chap 1-20
 Chapter Summary
In this chapter, we have
 Introduced the basic vocabulary and definitions of statistics, and
the role of statistics in turning data into information to facilitate
decision making
 Examined the use of statistics to:
 Summarize data
 Draw conclusions from data
 Make reliable forecasts
 Improve business processes
 Examined descriptive vs. inferential statistics
 Reviewed data types and measurement level
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 Tutorial 1

 Two parts :
 Part –A : Must be submitted in the classroom. (Hand written)
 Part – B : Discussed in the classroom.
 If you do not read the relevant sections from the book, you cannot
answer the questions.
 Attendance is mandatory.

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