1. Basic Business Statistics
Chapter 1 Introduction
Dr. Ahmet Demir
Ishik University, Sulaimani
Chap 1-1

2. Learning Objectives In this chapter you learn:
How businesses use statistics
The basic vocabulary of statistics
The types of data used in business
Chap 1-2

3. Why Learn Statistics Make better sense of the world
Make better business decisions
Internet articles / reports
Magazine articles
Newspaper articles
Television & radio reports
Business memos
Business research
Technical journals
Technical reports
Chap 1-3

4. In Business, Statistics Has Many Important Uses
To summarize business data
To draw conclusions from business data
To make reliable forecasts about business activities
To improve business processes
Chap 1-4

5. Two Different Branches Of Statistics Are Used In Business
The branch of mathematics that transforms data into useful information for decision makers.
Descriptive Statistics
Collecting, summarizing, presenting and analyzing data
Inferential Statistics
Using data collected from a small group to draw conclusions about a larger group
Chap 1-5

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
Chap 1-6

7. Descriptive Statistics
Collect data
e.g., Survey
Present data
e.g., Tables and graphs
Characterize data
e.g., The sample mean
Chap 1-7

8. 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.
Chap 1-8

9. 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.
Chap 1-9

10. 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.
Chap 1-10

11. Population vs. Sample Population Sample
Measures used to describe the population are called parameters
Measures used to describe the sample are called statistics
Chap 1-11

12. 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
Chap 1-12

13. Types of Variables Variables Categorical Numerical Discrete Continuous
Examples:
Marital Status
Political Party
Eye Color
(Defined categories)
Examples:
Number of Children
Defects per hour
(Counted items)
Examples:
Weight
Voltage
(Measured characteristics)
Chap 1-13

14. Levels of Measurement
A nominal scale classifies data into distinct categories in which no ranking is implied.
Categorical Variables Categories
Personal Computer Ownership
Type of Stocks Owned
Internet Provider
Yes / No
Growth / Value / Other
Microsoft Network / AOL/ Other
Chap 1-14

15. Levels of Measurement (con’t.)
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 1-15

16. 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.
Chap 1-16

17. Interval and Ratio Scales
Temperature Interval
Height Ratio
Age Ratio
Chap 1-17

18. 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
Chap 1-18