Basic Business Statistics
Chapter 1
Introduction and Data Collection
. Chap 1-1
Learning Objectives
In this chapter you learn:
◼ How Statistics is used in business
◼ The sources of data used in business
◼ The types of data used in business
Chap 1-2
Why Learn Statistics?
So you are able to make better sense of the
ubiquitous use of numbers:
◼ Business memos
◼ Business research
◼ Technical reports
◼ Technical journals
◼ Newspaper articles
◼ Magazine articles
Chap 1-3
What is statistics?
◼ A branch of mathematics taking and
transforming numbers into useful information for
decision makers
◼ Methods for processing & analyzing numbers
◼ Methods for helping reduce the uncertainty
inherent in decision making
Chap 1-4
Why Study Statistics?
Decision Makers Use Statistics To:
▪ Present and describe business data and information properly
▪ Draw conclusions about large groups of individuals or items,
using information collected from subsets of the individuals or
items.
▪ Make reliable forecasts about a business activity
▪ Improve business processes
Chap 1-5
Types of Statistics
◼ Statistics
◼ The branch of mathematics that transforms data into
useful information for decision makers.
Descriptive Statistics Inferential Statistics
Collecting, summarizing, and Drawing conclusions and/or
describing data making decisions concerning a
population based only on sample
data
Chap 1-6
Descriptive Statistics
◼ Collect data
◼ e.g., Survey
◼ Present data
◼ e.g., Tables and graphs
◼ Characterize data
◼ e.g., Sample mean =
X i
Chap 1-7
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 60
kg
Drawing conclusions about a large group of
individuals based on a subset of the large group.
.. Chap 1-8
Basic Vocabulary of Statistics
VARIABLE
A variable is a characteristic of an item or individual.
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.
Chap 1-9
Basic Vocabulary of Statistics
POPULATION
A population consists of all the items or individuals about which
you want to draw a conclusion.
SAMPLE
A sample is the portion of a population selected for analysis.
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.
Chap 1-10
Population vs. Sample
Population Sample
Measures used to describe the Measures computed from
population are called parameters sample data are called statistics
Chap 1-11
Why Collect Data?
▪ A marketing research analyst needs to assess the
effectiveness of a new television advertisement.
▪ A pharmaceutical manufacturer needs to determine
whether a new drug is more effective than those currently
in use.
▪ An operations manager wants to monitor a manufacturing
process to find out whether the quality of the product
being manufactured is conforming to company standards.
▪ An auditor wants to review the financial transactions of a
company in order to determine whether the company is in
compliance with generally accepted accounting
principles.
Chap 1-12
Sources of Data
▪ Primary Sources: The data collector is the one using the data
for analysis
▪ Data from a political survey
▪ Data collected from an experiment
▪ Observed data
▪ Secondary Sources: The person performing data analysis is
not the data collector
▪ Analyzing census data
▪ Examining data from print journals or data published on the internet.
Chap 1-13
Sources of data fall into four
categories
◼ Data distributed by an organization or an
individual
◼ A designed experiment
◼ A survey
◼ An observational study
Chap 1-14
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.
Chap 1-15
Types of Data
Data
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)
Chap 1-16
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
Chap 1-17
Levels of Measurement
▪ An ordinal scale classifies data into distinct categories
in which ranking is implied
Categorical Variable Ordered Categories
Student class designation Freshman, Sophomore, Junior,
Senior
Product satisfaction Satisfied, Neutral, Unsatisfied
Faculty rank Professor, Associate Professor,
Assistant Professor, Instructor
Standard & Poor’s bond ratings AAA, AA, A, BBB, BB, B, CCC, CC,
C, DDD, DD, D
Student Grades A, B, C, D, F
Chap 1-18
Levels of Measurement
▪ 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.
Chap 1-19
Interval and Ratio Scales
Chap 1-20
Comparison of Levels of Data
Chap 1-21
Examples of Levels of Data
Chap 1-22
Minitab & Microsoft Excel Terms
▪ When you use Minitab or Microsoft Excel, you place the data you
have collected in worksheets.
▪ The intersections of the columns and rows of worksheets form
boxes called cells.
▪ If you want to refer to a group of cells that forms a contiguous
rectangular area, you can use a cell range.
▪ Worksheets exist inside a workbook in Excel and inside a
Project in Minitab.
▪ Both worksheets and projects can contain both data, summaries,
and charts.
Chap 1-23
You are using programs properly if
you can
◼ Understand how to operate the program
◼ Understand the underlying statistical concepts
◼ Understand how to organize and present information
◼ Know how to review results for errors
◼ Make secure and clearly named backups of your work
Chap 1-24
Chapter Summary
In this chapter, we have
▪ Reviewed why a manager needs to know statistics
▪ Introduced key definitions:
▪ Population vs. Sample
▪ Primary vs. Secondary data types
▪ Categorical vs. Numerical data
▪ Examined descriptive vs. inferential statistics
▪ Reviewed data types and measurement levels
▪ Discussed Minitab and Microsoft Excel terms
Chap 1-25
