BINOMIAL TEST

The binomial test is used when our variable of interest is dichotomous. It compares an
observed distribution with a theoretical one and tells us whether there are significant
differences between the two.
 
The observed distribution is generally the sample distribution, while the theoretical
distribution is the population distribution.
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The hypotheses of the binomial test:

 
H0: there are no significant differences between the sample distribution and the population
distribution
 
H1: there are significant differences between the sample distribution and the population distribution

We will reject the null hypothesis if Sig.<0,05.

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Assumptions:
 
1. Our variable is dichotomous.
2. The two categories are mutually exclusive, (i.e. each case can be in one group and
only one).
 
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The male percentage in the total U.S. population is 47.9%; so the female percentage is
52.1%.
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Let’s suppose that a merchant wants to prove that his refund rate is lower than 5%. He
knows that he had 14 refund requests out of the last 420 sales.
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The hypotheses of our test are written as follows:

 
H0: The percentage of refunds is equal to or greater than 5%

H1: The percentage of refunds is lower than 5%

We will reject the null hypothesis if Sig.<0,05.