Basic Business Statistics 12 th Edition Chapter 1

Learning Objectives In this chapter you learn: n How businesses use statistics The basic vocabulary of statistics n The types of data used in business n n How to use Microsoft Excel and / or Minitab with this book Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -2

Why Learn Statistics Make better sense of the world Make better business decisions n Internet articles / reports n Business memos n Magazine articles n Business research n Newspaper articles n Technical journals n Television & radio reports n Technical reports Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -3

In Business, Statistics Has Many Important Uses n To summarize business data n To draw conclusions from business data n n To make reliable forecasts about business activities To improve business processes Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -4

Two Different Branches Of Statistics Are Used In Business Statistics The branch of mathematics that transforms data into useful information for decision makers. Descriptive Statistics Inferential Statistics Collecting, summarizing, presenting and analyzing data Using data collected from a small group to draw conclusions about a larger group Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -5

These Two Branches Are Used In The Important Activities n To summarize business data n n To draw conclusions from business data n n Inferential methods used to reach conclusions about a large group based on data from a smaller group To make reliable forecasts about business activities n n Descriptive methods used to create charts & tables Inferential methods used to develop, quantify, and improve the accuracy of predictive models To improve business processes n Involves managerial approaches like Six Sigma Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -6

Descriptive Statistics n Collect data n n Present data n n e. g. , Survey e. g. , Tables and graphs Characterize data n e. g. , The sample mean Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -7

Inferential Statistics n Estimation n n e. g. , Estimate the population mean weight using the sample mean weight Hypothesis testing n 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -8

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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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. 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -10

Population vs. Sample Population Measures used to describe the population are called parameters Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Sample Measures used to describe the sample are called statistics Chap 1 -11

This Book Is Organized To Show The Four Uses Of Statistics n n To summarize business data (Chapters 2 & 3) To draw conclusions from business data (Chapters 4 – 12) To make reliable forecasts about business activities (Chapters 13 – 16) To improve business processes (Chapter 18) Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -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 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -13

Types of Variables Categorical Numerical Examples: n n n Marital Status Political Party Eye Color (Defined categories) Discrete Examples: n n Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Number of Children Defects per hour (Counted items) Continuous Examples: n n Weight Voltage (Measured characteristics) Chap 1 -14

Levels of Measurement A nominal scale classifies data into distinct categories in which no ranking is implied. Categorical Variables Categories Personal Computer Ownership Yes / No Type of Stocks Owned Growth / Value/ Other Internet Provider Microsoft Network / AOL/ Other Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -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, A, BBB, B, CCC, C, DDD, D Student Grades A, B, C, D, F Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -17

Interval and Ratio Scales Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1 -19