Assignment 01

BUSINESS STATISTICS

LASITHA NAWARATHNA
# 17253
Business statistics

G.G.N.M.L.C.K Nawarathana
Number 17253
Basic introduction about Descriptive statistics

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Descriptive statistics deals with methods of organizing, summarizing, and presenting data in a
convenient and informative way.
One form of descriptive statistics uses graphical techniques, which allow statistics
practitioners to present data in ways that make it easy for the reader to extract useful
information.

Statistical measures applied to descriptive data are as follows:

Measures of central tendency/average

Mean

Median

Mode

Measure of spread/dispersion

Range

Variance

Standard deviation

Measure of relative position

Standard scores

Percentile rank

Percentile score

Measures of relationship

Coefficient of correlation

Statistics Graphic Portrayals

Importance of descriptive statistics for business decision making.

Current business world most of decisions are driven by data. In all aspects of our lives, and
importantly in the business context, an amazing diversity of data is available for inspection and

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enlightenment. Moreover, business managers and professionals are increasingly encouraged to
justify decisions on the basis of data.
Business managers need descriptive statistic support. Statistical skills enable managers to
intelligently collect, analyze and interpret data relevant to their decision-making.
Example: - 01

Measures of central tendency & Measure of spread how important to

decision making
To understand mean median and standard variations uses in business decision making below
taken Return on investment analysis of ABC LTD and XYZ LTD

Measures ABC LTD XYZ LTD

mean 9.95 13.76
standard error 3.1 3.97
median 9.88 11.76
mode 12.89 12.97
standard deviation 19.89 29.05
sample variation 479.35 786.62
skewness 0.68 0.02
range 84.95 106.47
minimum -21.95 -38.47
maximum 73 78
sum 746.25 1032
count 75 75

We can noticed XYZ has high mean of investment return. That reflect XYZ LTD getting high
average return than ABC LTD. Median also shows lager number. But when we making
decision should need to consider Risk on the investment. Than should need to consider
variation and standard deviation.
ABC LTD have smaller variation and standard deviation. Then we can decide either going
ABT with low risk or going with XYZ with high risk.

Coefficient variation how important in decision making

Example:-
The coefficient of variation could help investors select investments based on the risk/reward
ratio and their profiles. For example, an investor who is risk-averse may want to consider assets
that have historically had a low degree of volatility and a high degree of return, in relation to
the overall market or its industry. Conversely, risk-seeking investors may look to invest in
assets that have had a high degree of volatility.

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 For example, assume a risk-averse investor wishes to invest in an exchange traded fund (ETF)
that tracks a broad market index. The investor narrowed the ETFs down to the ABC LTD, XYZ
LTD and PQR LTD. The investor analyzes the ETFs' returns and volatility over the past 15
years, and the investors assumes the ETFs could be expected to have similar returns to their
long-term averages.

over 15 years
category
ABC LTD XZY LTD PQR LTD
AVG annual return 5.47% 9.88% 6.88%
standard deviation 14.68% 21.31% 19.46%
coefficient of
variation 2.68 3.09 2.72

Based on the approximate figures, the investor could invest in either the ABC LTD or PQR
LTD, since the risk/reward ratios are approximately in line.

Graphical Presentation importance of decision making

A graph is a method of presenting statistical data in visual form. The main purpose of any chart

Chart Description and common use

Pie charts A pie graph is defined as a graph which contains a circle which is divided into sectors. These
sectors illustrate the numerical proportion of the data
Bar Graph The rectangular bars are separated by some distance in order to distinguish them from one
another. The bar graph shows comparison among the given categories.

Line Graph A line graph is a kind of graph which represents data in a way that a series of points are to be
connected by segments of straight lines. In a line graph, the data points are plotted on a graph
and they are joined together with straight line.

Component bar A component bar chart subdivides the bars in different sections. It is useful when the total of
chart - the components is of interest. The following example gives the nutritive values of food.
Histogram and The histograms and frequency polygons are very common graphs in statistics. A histogram is
Frequency defined as a graphical representation of the mutually exclusive events. A histogram is quite
Polygon similar to the bar graph. Both are made up of rectangular bars. The difference is that there is
no gap between any two bars in the histogram. The histogram is used to represent the
continuous data
is to give a quick, easy-to-read-and-interpret pictorial representation of data which is more
difficult to obtain from a table or a complete listing of the data. The type of chart or graphical
presentation used and the format of its construction is Incidental to its main purpose.

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Overall uses of descriptive statistic in business world

In the business world, and in fact, in practically every aspect of daily living, descriptive
statistics are used to assist in decision making. In order to work effectively in a modern business
organization, whether the organization is a private commercial company, a government agency,
a state industry or whatever, managers must be able to use statistical techniques in a confident
and reliable manner.

Accountants make decisions based on the information relating to the financial state
of organization.
Economists make decision based on the information relating to the economic
framework in which the organization operates.
Marketing staff make decisions based on customer response to product and design.
Personnel managers make decisions based on the information relating to the levels of
employment in the organization

Such information is increasingly quantitative and it is apparent that managers need a working
knowledge of the procedures and techniques appropriate for analyzing and evaluating such
information.

Importance of descriptive statistics in business decisions

1. Get knowledge about entire picture.

Such representation creates clear and complete idea in the mind of audience. Reading
hundred pages may not give any scope to make decision. But an instant view or looking at
a glance obviously makes an impression in the mind of audience regarding the topic or
subject.

2. Fast decision making with less effort.

A graph is the representation of data by using graphical symbols such as lines, bars, pie
slices, dots etc. A graph does represent a numerical data in the form of a qualitative structure
and provides important information.

3. To increase accuracy of decisions.

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 Without going through all numerical values, descriptive statistics facilitate to make
accurate decisions by using Measures of central tendency, Measure of spread and
Measures of relationship. Understand what each statistical tool can and cant measure; use
several tools that complement one another

4. Improve quality aspects and reduce process wastages.

Anyone who has looked into continuous improvement or quality assurance programs, such
as Six Sigma or Lean Manufacturing, understands the necessity for statistics. Statistics
provide the means to measure and control production processes to minimize variations,
which lead to error or waste, and ensure consistency throughout the process. This saves
money by reducing the materials used to make or remake products, as well as materials lost
to overage and scrap, plus the cost of honoring warranties due to shipping defective
products.

5. Backing Judgments with Comparative Analysis:

Statistics back up assertions. Leaders can find themselves backed into a corner when
persuading people to move in a direction or take a risk based on unsubstantiated opinions.
Descriptive Statistics can provide objective goals with stand-alone figures as well as hard
evidence to substantiate positions or provide a level of certainty to directions to take the
company. Information can be compared in terms of graphical representation . such
comparative analysis helps for quick understanding and attention

6. Proper analysis for the market and improve reach and development.

A company also uses statistics in market research and product development, using different
surveys, such as random samples of consumers, to gauge the market for a proposed product.
A manager conducts surveys to determine if there is sufficient demand among target
consumers. Survey results might justify spending on developing the product. A product
launch decision might also include a break-even analysis, such as finding out what
percentage of consumers must try a new product for it to be successful.

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