Quantitative Methods for

Management
Term II
4 credits
MGT 408
Statistics for Business and
Economics
Anderson, Sweeney , Williams
Cengage learning
 Additional Readings
Business statistics- Ken Black

Business statistics J.K. Sharma

 Assessment
Assignments TWO 15x2 = 30 marks

End term Objective questions 50/52

each carries 2 marks ( concepts and simple

problems)
 Subject Outline
Introduction
Data collection, classification and presentation
Measures of central tendencies and dispersion
Correlation and Regression analysis
Probability concepts
Probability distributions Binomial and Poisson
Probability distribution Normal
Sampling techniques
Estimation and Inference statistics
Bayesian Analysis and decision theory
Testing of Hypothesis Non Parametric ( Chi square)
 Quantitative Methods for
Management
Introduction
Definition
Importance and limitations
Applications
Terminologies
Scale of measurement
Type of variables
Qualitative, quantitative
Time series and cross sectional
Types of statistics
Sources of data
Classification of data
Statistical software
 Introduction.
Of the 18000 foodmakers, the largest 20 now
account for nearly 54% of checkout sales.
The Consumer Price Index (CPI) declined 0.3% in
April.
The average compensation package for CEOs
across 50 large corporations was Rs. 1 million.
E-commerce sites spend an average of Rs. 5000
to acquire each customer.
The Hindu reaches 46% of the regions
households during weekdays and 61% on
Sundays.
Stocks account for 75% of the average investors
portfolio.
 CFOs were asked as to which initiative
they would put on hold in an uncertain
economy
32% Expansion
23% M&A
10% New Product Launch
18% Technology upgrade
9% None
8% Any other
THESE ARE FACTS & FIGURES
. . . . . . ?????
Decision
making
Knowledge
Information
DATA
 What is Statistics?
Statistics is a way to get information from data
Statistics

Data Information

The word Statistics derived from the Latin word

status meaning a state

Statistics is a tool for creating new understanding from a set of

numbers.
 DEFINITION
STATISTICS
COLLECTION
COMPILATION
CLASSIFICATION
PRESENTATION
ANALYSIS &
INTERPRETATION OF DATA
 IMPORTANCE OF STATISTICS LIMITATIONS OF STATISTICS

It simplifies complexity Only quantitative data

It measures periodic changes Does not study individual
Facts are properly presented events
Formulation of policies Results are true only on
Enlarge human experience averages
and knowledge Does not give importance to
Helps in comparison all items
Forecasting Can be misused
Testing a hypothesis Single purpose only
Application of statistics in
business
 Accounting : Public accounting firms use statistical
procedures when conducting audits for their clients.
Economics : uses statistical information in making
forecasts about the future of the economy or some
aspect of it. Regional, National, and international
economic performance
Finance : Financial advisors use price-earnings ratios
and dividend yields to guide their investment advice.
Investments and portfolio management.
Banking Economic , Market conditions
 Entrepreneurship Market study, trends,
competition, consumer preferences
Production forecasting demand, feedback
surveys. A variety of statistical quality control
charts are used to monitor the output of a
production process.
Purchasing vendor rating
International Business market and
demographic analysis
 Investment stock, securities, real estate-prices
Management human resources, compensation,
and quality management
Management Information systems Performance
of systems which gather, summarize, and
disseminate information to various managerial
levels.
Marketing market analysis and consumer
research. Electronic point of sale scanners at
retail checkout counters are used to collect data
for a variety of marketing research applications.
 QC SQC, sampling inferences

HR Wage rate, cost of living indices, Job stress

Retail footfalls, consumer preferences

Medical Sciences tests of significance

Technology Predicting trends, Structuring data

 Data Warehousing
Organizations obtain large amounts of data on a
daily basis by means of magnetic card readers, bar
code scanners, point of sale terminals, and touch
screen monitors.

Capturing, storing, and maintaining the data, referred

to as data warehousing, is a significant undertaking.
 Data Mining
Analysis of the data in the warehouse might aid in
decisions that will lead to new strategies and higher
profits for the organization.
Using a combination of procedures from statistics,
mathematics, and computer science, analysts mine
the data to convert it into useful information.

The most effective data mining systems use automated

procedures to discover relationships in the data and
predict future outcomes, prompted by only general,
even vague, queries by the user.
Terms and terminologies
 Data are the facts and figures collected, analyzed,
and summarized for presentation and interpretation.
All the data collected in a particular study are referred
to as the data set for the study
Elements are the entities on which data are collected
A variable is a characteristic of interest for the
elements.
The set of measurements obtained for a particular
element is called an observation
A data set with n elements contains n observations
Data, Data Sets,
Elements, Variables, and Observations
Variables

Element
Names Stock Annual Earn/
Company Exchange Sales($M) Share($)

Dataram NQ 73.10 0.86

EnergySouth N 74.00 1.67
Keystone N 365.70 0.86
LandCare NQ 111.40 0.33
Psychemedics N 17.60 0.13

Data Set
Population - the set of all elements of interest in a
particular study
Sample - a subset of the population

Statistical inference - the process of using data obtained

from a sample to make estimates
and test hypotheses about the
characteristics of a population
Census - collecting data for the entire population

Sample survey - collecting data for a sample

 Population Sample

Subset

Parameter Statistic
Populations have Parameters Samples have Statistics.
Descriptive measures of population descriptive measures of sample

A census is a complete enumeration of every item in a population.

 Symbols for
Population Parameters

denotes population parameter

2
denotes population variance
denotes population standard deviation
 Symbols for
Sample Statistics

x denotes sample mean

S
2
denotes sample variance
S denotes sample standard deviation
Types of statistics

Descriptive
inferential
 Descriptive Statistics
Most of the statistical information in newspapers,
magazines, company reports, and other
publications consists of data that are summarized
and presented in a form that is easy to understand.

Such summaries of data, which may be tabular,

graphical, or numerical, are referred to as descriptive
statistics.
 Statistical Inference
Statistical inference is the process of making an estimate, prediction, or
decision about a population based on a sample.

Population

Sample

Inference

Statistic
Parameter

What can we infer about a Populations Parameters

based on a Samples Statistics?
 Descriptive vs.
Inferential Statistics

Descriptive Statistics using data

gathered on a group to describe or reach
conclusions about that same group only

Inferential Statistics using sample data

to reach conclusions about the population
from which the sample was taken
Process of Inferential Statistics

Calculate x
to estimate
Population Sample
x
(parameter ) (statistic )

Select a
random sample
 Levels of Data Measurement

Nominal Lowest level of measurement

Ordinal
Interval
Ratio Highest level of measurement
 Nominal Level Data
Numbers are used to classify or categorize
Example: Employment Classification
1 for Educator
2 for Construction Worker
3 for Manufacturing Worker
Example: Ethnicity
1 for African-American
2 for Anglo-American
3 for Hispanic-American
 Ordinal Level Data
Numbers are used to indicate rank or order
Relative magnitude of numbers is meaningful
Differences between numbers are not comparable

Example: Ranking productivity of employees

Example: Taste test ranking of three brands of soft drink
Example: Position within an organization
1 for President
2 for Vice President
3 for Plant Manager
4 for Department Supervisor
5 for Employee
Example of Ordinal Measurement

1 f
6 i
2 n
4 i
3 s
h
5
 Ordinal Data

Faculty and staff should receive preferential

treatment for parking space.

Strongly Agree Neutral Disagree Strongly

Agree Disagree

1 2 3 4 5
 Interval Level Data
Distances between consecutive integers are equal
Relative magnitude of numbers is meaningful
Differences between numbers are comparable
Location of origin, zero, is arbitrary
Vertical intercept of unit of measure transform
function is not zero
Example: Fahrenheit Temperature
Example: Calendar Time
Example: Monetary Utility
 Ratio Level Data
Highest level of measurement
Relative magnitude of numbers is meaningful
Differences between numbers are comparable
Location of origin, zero, is absolute (natural)
Vertical intercept of unit of measure transform function is
zero
Examples: Height, Weight, and Volume
Example: Monetary Variables, such as Profit and Loss,
Revenues, and Expenses
Example: Financial ratios, such as P/E Ratio, Inventory
Turnover, and Quick Ratio.
Usage Potential of Various
Levels of Data
Ratio
Interval
Ordinal

Nominal
 Data Level, Operations,
and Statistical Methods

Statistical
Data Level Meaningful Operations
Methods

Nominal Classifying and Counting Nonparametric

Ordinal All of the above plus Ranking Nonparametric

Interval All of the above plus Addition, Parametric

Subtraction, Multiplication, and
Division

Ratio All of the above Parametric

 Scales of Measurement

Data

Categorical Quantitative

Numeric Non-numeric Numeric

Nominal Ordinal Nominal Ordinal Interval Ratio

Cross-Sectional Data

Cross-sectional data are collected at the same or

approximately the same point in time.

Example: data detailing the number of building

permits issued in February 2010 in each of the
counties of Ohio
Time Series Data

Time series data are collected over several time

periods.

Example: data detailing the number of building

permits issued in Lucas County, Ohio in each of
the last 36 months
Time Series Data

U.S. Average Price Per Gallon

For Conventional Regular Gasoline

Source: Energy Information Administration, U.S. Department of Energy, May 2009.

Sources of data collection
 Data Sources
Statistical Studies - Experimental
In experimental studies the variable of interest is
first identified. Then one or more other variables
are identified and controlled so that data can be
obtained about how they influence the variable of
interest.

The largest experimental study ever conducted is

believed to be the 1954 Public Health Service
experiment for the Salk polio vaccine. Nearly two
million U.S. children (grades 1- 3) were selected.
Data Sources

Statistical Studies - Observational

In observational (nonexperimental) studies no
attempt is made to control or influence the
variables of interest. a survey is a good example

Studies of smokers and nonsmokers are

observational studies because researchers
do not determine or control
who will smoke and who will not smoke.
 Primary
Secondary

Organizing the data Editing/ Coding/

 Statistical softwares
MS- EXCEL
Minitab
SAS
SPSS
StatTools

( chapter 1 pages : 1-32)