Elementary Business Statistics

Group 08
1st Batch, BBA Program Department of Finance & Banking Jahangirnagar University, Bangladesh

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Topics Now
Topics
Statistics
Statistical Method
Speaker: Md. Abdul Ali (Student i.d: 1279)

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Statistics
Statistics
Statistics is basically a tool to obtain and analyze data to base

decisions on them

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Features of Statistics-1 Statistics: Features-1

Aggregation of facts
For comparison and judgment, only correlated or

comparable data is used

Isolated data: Rahim got 20 in Physics

Comparable data: Rahim got 20 out of 100 in Physics

Affected by multiplicity of causes

Usually facts are affected by a number of forces working

together. Statistics help find the cause-effect relationship

A products demand depends on its price, customers

income, preference, presence of substitutes etc.

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Features of Statistics-2 Statistics: Features-2

Numerically expressed
Statistics deals mostly with quantitative data
For clarity and performing calculation

In dealing with qualitative data, they must be converted to

quantitative data first

Qualitative data: Mr. Rahim is highly paid

Quantitative data: Mr. Rahims monthly income is Tk.

20,00,000

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Features of Statistics-3 Statistics: Features-3

Estimated to some reasonable standard of accuracy
Statistics is not such an accurate field of study like physics,

chemistry etc.

Why?
In statistical investigation, we face a tradeoff between

accuracy and efficiency

Example: To find the average income of people of BD

Accurate but unrealistic method: Collecting data from each

& every citizen Realistic but approximate method: Using a sampling method

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Features of Statistics-4 Statistics: Features-4

Statistics is a systematic process
All statistical work follow a systematic process
Data collection, organization, presentation, analysis and

interpretation

Helps fulfill some predetermined purpose

A clearly defined purpose helps plan and control accordingly
Example:
Vague purpose: Knowing the customers perception of the

product to take necessary action Clear Purpose: Determine the market share of Sunsilk minipack shampoo to reform the marketing campaign

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Data: Foundation of Statistics

Data
Data are facts and figures used for analysis to reach a

conclusion

Example:
Objective: Calculating average age of the supervisors of a

firm Data: Age of the supervisors

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Characteristics of Data Data: Characteristics

Relevant
Related to the purpose

Reliable
Collected from reliable source(s) using acceptable method(s)

Timeliness
Gathered from the appropriate time period

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Statistical Method Statistical Method

How statistical analysis is conducted
Collecting data
Organizing data

Presenting data
Analyzing data

Interpretation of finding

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Collection of Data-1 Collecting data-1

First step of statistical work
Collected from three types of sources
Secondary
Internal

Primary

Secondary Sources
Here, data are already collected by others
Articles, publications, research papers, newspapers etc.

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Collection of Data-2 Collecting data-2

Internal Sources
Here, data are by-product of routine business operations
Cash budget, cost sheet etc.

Primary Sources
Here, data are collected for the first time
Done in two ways
Observation

Survey

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Collection of Data-3 Collecting data-3

Primary Sources- Observation
Seeing with a purpose
Usually used in covert investigations
Food quality of a restaurant and mobile court

Primary Sources- Survey

Obtaining information through inquiry
Done trough

Interview: Face to face, over phone, mail, chat etc

Questionnaire: Filling up a form of predetermined

questions

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Data Collection and Sampling

Sample
A representative portion of the population under study
Sampling is used to investigate a huge population efficiently

and with reasonable accuracy

Sampling techniques
Probability sampling
Simple random sampling Systematic sampling Stratified sampling Cluster sampling

Nonprobability sampling
Convenience sampling Judgment sampling Quota sampling Snowball sampling
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Organization of Data-1 Data Organization-1

Classifying the data
Grouping data

Basis of Classifying Data

Geographical: Country-wise, district-wise, city-wise etc
Chronological: On the basis of time- either ascending or

descending

2001, 2002, 2003, 2004 etc.

Qualitative: According to some quality or attribute

Education, religion, gender, employment etc.

Quantitative: In terms of measurable characteristics

Age, income, height, weight etc.

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Organization of Data-2 Data Organization-2

Grouping Data
Organizing data in range and frequency

Facilitates calculation and interpretation

Here the monthly income of 20,000 businessmen of a town is

given

Monthly Income

No. of Businessmen

5000-10000
10000-15000 15000-20000

4000
3000 8000

20000-25000
25000-30000 Total
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1500
3500 20000
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Presentation of Data Data Presentation

Arranging data in a way that the facts can be easily grabbed

Ways of Presenting Data

Numeric presentation
Through tables

Pictorial presentation
Through diagrams and graphs

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Data Tabulation
Table
Presenting data in rows and columns

Table: 1 Net income of X company in the past 5 years

Year
2006 2007

Net Income (Millions of Taka)

60 75

2008
2009 2010 2011

67
87 83 94

Source: Company website (http://www.x.com/anreport)

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Charting Data
Charting Data
Ways to chart data
In two ways
Diagrams
Graphs

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Charting Data: Diagrams

Diagrams
In diagrams, data are expressed through shapes
Most frequently used is bar diagram
95
90 85 80 75 70 Economics English Maths Bangla

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Charting Data: Graphs

Graphs
Graphs expresses numerical information through lines

Types of Graphs
Graphs of time series or line graphs

Graphs of frequency distribution

Time graph
Shows chronological data

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Charting Data: Graphs

Graphs
Graphs of frequency distribution
Pictorial representation of grouped data

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Coming Up Topics to Cover Next

Measures of central tendency
Measures of variation
Speaker: Md. Sajadul Islam (I.D: 1799)

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Central Tendency: What & Why? Central Tendency

Central Tendency
The tendency of some central value around which data tends

to gather

This value being neither small nor large but somewhere in

middle

Objectives
Deriving a representative value of the data set Facilitating further calculation

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Features of an ideal Central Value An ideal Central Value

Easy to understand
Simple to calculate

Based on all observation

Defined by an algebraic formula

Capable of further treatment

Having sampling stability

Not unduly affected by extreme value in the data set

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Central Tendency: Tools Calculating Central Tendency

Mostly used are:
Arithmetic mean

Median
Mode

Geometric mean
Harmonic mean

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Arithmetic Mean
Arithmetic Mean
Obtained by adding together all the observations then

dividing it with the number of observations

Most popular and most frequently used

Can be computed for both

Ungrouped data and

Grouped data

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Arithmetic Mean: Ungrouped Data Main Formulae X X X X

Where,

X = Particular observation

N = Number of observations

Example
Mean age of 5 supervisors:
25, 38, 19, 59 and 44

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Arithmetic Mean: Grouped Data Main Formulae X

Where

= frequency, X = class mid point, N = total frequency

Example
Mean age of 50 workers:

Age 20-30

Workers

Midpoint X 25

X
375

15

30-40
40-50

15
20 N=50

35
45

525
900

fx=1800

X 1800 36 X
N 50
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Median
Median
A number appearing in the middle of an ordered sequence

of value

Therefore it is a positional average

Can be computed for both

Ungrouped data and

Grouped data

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Median: Ungrouped Data-1 Median: Ungrouped Data-1

Steps in calculation
Arrange the data in either ascending and descending order

Apply the following formula

n1 Median= size of 2

th observation If the number of observation is even then there is another step

Median Number in position before fraction Number in position after fraction 2

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Median: Ungrouped Data-2 Median: Ungrouped Data-2

Example
Median marks in English of 6 students

Calculation
Size of (6+1)/2= 3.5 th position Mode= (77+80)/2=78.5

Position Marks

1 2
3 4 5

65 70
77 80 88

93

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Median: Grouped Data-1 Median: Grouped Data-1

Steps in calculation Determine the median class by applying this formula N Median Class 2 Calculate median by applying this formula
Median
Here:

(N/2) - p.c.f. i f

L = Lower limit of the median class

p.c.f. = preceding cumulative frequency to the median class f = frequency of the median class i = class interval of the median class

N = total frequency
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Median: Grouped Data-2 Median: Grouped Data-2

Example Median salary of 200 officers
Median Class N 2 =200/2 =100 Median class is 10000-15000

Salary 5000-10000 10000-15000

Officers

Cumulative Frequency 60 103

60 43

15000-20000
20000-25000

45
37 15

148
185 200

25000-30000 =10000+[{(100-60)/43}] x 5000] = 14651.16 Taka

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Median L

(N/

Mode
Mode
Most available data in the data set

Mode: Ungrouped Data

Formula
Observe the data and tally it

Mode: Ungrouped Data

Formula

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Measures of Variation
Variation
Measuring the spread of the data around the mean or

median

Popular techniques of measuring variation

Range
Average Deviation

Standard deviation

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Range
Range
Simply the difference between the highest value and lowest

value

Ungrouped Data

Range = L-S
Coefficient of range

COR=(L-S)/(L+S) Grouped Data

Range = L-S
Coefficient of range

COR=(L-S)/(L+S)

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Average Deviation Average Deviation

Can be calculated from either mean or median

Formula for Ungrouped Data

X - X or Median
N
Formula for Ungrouped Data

f X - X or Median
N

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Standard Deviation Standard Deviation

Also known as root mean square deviation
Most reliable measure of variation
Formula for Ungrouped Data

(x x )
N

Formula for Ungrouped Data

f(x x) f

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Coming Up Topics to Cover Next

Correlation Analysis Speaker: Abu Naim Mohammad Solaiman (I.D: 1270)

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Correlation Analysis
Correlation
The relationship between two or more variables

Example:
Income and expenditure is positively related

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Correlation: Types
Types of
Three types. Based on

Direction of correlation
Positive and negative

No of dependant variable
Simple, partial and multiple

Ratio of change of dependent variable

Linear and non linear

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Correlation Methods Correlation Methods

There are four methods
Scatter diagram method

Karl Pearsons coefficient of correlation

Spearmans Rank correlation coefficient

Method of least squares

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Scatter diagram Method Scatter diagram

Showing correlation through graph
The independent variable is plotted in the X-axis, and

dependant variable on the Y-axis

There can be five types of relationship

Perfectly positive

Perfectly negative
Positive Negative No correlation

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Karl Pearsons coefficient of correlation-1 Karl Pearsons coefficient of correlation-1

Most widely used

Formula

(X X)(Y - Y) (X - X) (Y - Y)
2

Here, X and Y are the two variables under observation

When
r = 1: Perfectly positive correlation
r = -1: Perfectly negative correlation

r = 0: No correlation
r > 0: Positive correlation

r <0: Negative correlation

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Rank Correlation-1 Rank Correlation-1

Calculation of the degree agreement/disagreement in

between two or more rankings

Formula

6 D2 r 1 3 N N

D = Ranking 1 Ranking 2
N = no of items/individuals/observations

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Up Next
Up Next
Forecasting
Time Series Speaker: Nawsheen Huq (i.d. 1256)

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Forecasting and Business Business Forecasting

Predicting the state of the business environment following

some logical process

Forecasting helps
Handle unexpected threats
Avail opportunity

Smooth operation of business

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Objectives of Forecasting Forecasting: Objectives

Determining the most effective obtainable source to design

the realistic future prospect Managing the risks involved in businesses

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Forecasting Process Forecasting Process

Three steps of forecasting
Understanding the changes in previous events

Determining the appropriate phase of business action to be

analyzed Analyzing the obtained data

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Importance of Forecasting Forecasting: Importance

Basis to plot future plans and goals
Helps to identify and monitor the critical factors

Helps in Controlling
Lighthouse to contingency plans

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Forecasting Methods-1 Methods of Forecasting

Historical analogy method
Field surveys and opinion polls

Business barometers
Extrapolation

Regression analysis
Econometric models

Input-output or end-use analysis

Time series analysis

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Forecasting Methods-2 Forecasting Methods-2

Historical Analogy Method:

Forecasting process based on the similar incidents of the past

Example

the percentage of internet users among students of BD at present time can be compared with that of India 5 years back

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Forecasting Methods-3 Forecasting Methods-3

Field Surveys and Opinion Poll

The method to gain first-hand data by survey, observation or interview.

Example

The level of profitability of a newly launched product can be determined in this way.

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Forecasting Methods-4 Forecasting Methods-4

Business Barometer

Practical forecasting is based on with the assistance of some index or indicator of activity.

Example:

GDP, Industrial Production, Stock Prices etc.

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Forecasting Methods-5 Forecasting Methods-5

Extrapolation:

Here the it is assumed that, the variable will behave very much similarly as it behaved in the past.

Example:

If the average GPA of a student in previous 4 semesters was 2.5, then his future GPAs can be expected to be close to that number

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Forecasting Methods-5 Forecasting Methods-5

Regression Analysis:

For correlated data, we can find out the change of the dependent variable based on the change of the independent one(s).

Econometric Models

Considering combined terms from economics, mathematics, and statistics, this model is prepared
Used to simulate the future state of events

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Forecasting Methods-6 Forecasting Methods-6

Input- Output Analysis:

Monitoring the workflow of a process to predict the end

Time Series Analysis:

It forecasts the future, by observing the trend of chronologically presented data. Future production of a factory can be estimated by observing the past production over the time

Example,

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Time Series Analysis Time series Analysis

Most popular and most frequently used forecasting method

Components of time series

Four components
1. Secular trend
2. Cyclical variation

3. Seasonal variation
4. Irregular variation

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Time Series: Secular Trend Secular Trend

Indicates the long-term movement of the variable It can be of two types

1. Linear trend
2. Non-linear trend

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Time Series: Cyclical Variation Secular Trend

Indicates the long-term movement of the variable Can be of two types

1. Linear trend

2. Non-linear trend

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Time Series: Cyclical Variation Cyclical Variation

When the time series follows a certain repetitive pattern over the long term
Example: Business cycle

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Time Series: Seasonal Variation Seasonal Variation

The periodical movement of a variable within one year.
This change follows every year

Example: An ice cream companys sales is much higher in

the summer than winter

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Irregular Variation
Irregular Variation
Variations following no definite pattern
May be caused by random events

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Up Next
Coming Up
Probability theory

Speaker: Nazia Ahmed (i.d: 1254)

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Probability
Probability
A possibility of something to happen

Formal Treatment of probability

An assigned number ranging from 0 to 1 describing the

chances of an event to occur

Symbolized by P(E)

Can also be expressed in percentages

How the number is assigned differs among different schools of

thought. They are:

Objective Probability Classical Probability Empirical Probility Subjective Probability

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Objective Probability-1 Objective Probability

Here, theorists believe that probability should be calculated

based on logic and mathematical theories

Classical Probability
Here, it is believed that each possible outcome of an

experiment is equally possible. They are also:

Mutually exclusive: multiple outcomes cant occur at the

same time Collectively exhaustive: All the probabilities of the outcomes equal to unity or 100%

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Objective Probability-2 Classical Probability

Formula
Probability = no of favorable outcomes/total no of possible

outcomes

Example:
The probability of getting tails in a toss is 0.5

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Objective Probability-3 Empirical Probability

Here, probability is assigned based on how many times an

outcome occurred in the past,

This requires repetitive experiments

Example: If from 400 candidates 8 where selected for job then

the probability of a particular candidate being selected is

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Subjective Probability Subjective Probability

Here, it is the probability is assigned based on personal

judgment, experience, available information etc.

Useful when no previous data can be compared to it

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Probability Theory and Business Probability Theory in Business

Risk is inherent in business. Avoiding risks can give the firm an

edge

Probability helps measure the risks involved in business

Probability of unfavorable events

The insurance business totally depends on it

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Fundamental Rules of Probability-1 Rules of Probability-1

Rules of addition,
Rules of multiplication

Rules of addition-1
The probability of occurring several mutually exclusive

outcomes is the addition of their probability

Formula
P (A or B) = P(A) + P(B)
P (C or D or F) = P(C) + P(D) + P(F)

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Fundamental Rules of Probability-2 Rules of Probability-2

Rules of Addition-2
When the events are not mutually exclusive the formula is

different

Formula
P(A or B) = P(A) + P(B) - P(A and B)

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Fundamental Rules of Probability-3 Rules of Probability-3

Rules of multiplication-1
The probability of occurring two unrelated events is the

multiplication of their probabilities

Formula
P(A and B) = P(A) P(B)

P(C and D and F) = P(C) P(D) P(F)

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Fundamental Rules of Probability-4 Rules of Probability-4

Rules of addition-2
If occurrence of one event depends on occurrence of

another, then the formula is different

Formula
P(A and B) = P(A) P(B I A)

P(C and D and F) = P(C) P(D I C) P(F I C and D)

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Probability Distribution Probability distribution

A list of all the outcomes of an experiment and the probability

attached to them

A frequency distribution focusing on future

There are also probability distribution curves An important probability distribution curve is the normal

probability distribution (NPD) curve

It is not a single curve, it has a whole family of curves

consisting of infinite number of curves

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Normal Probability Distribution (NPD) Curve Features

Bell shaped
Mean, median, and mode are equal

Symmetrical about the mean

Asymptotic to the X-axis

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Working With Normal Probability Curves Normal Probability Curves

For simplicity of calculation and avoid contradiction, a

standard normal distribution curve is used

Standard Normal Distribution Curve

A frequency curve having mean of 0 and standard deviation

of 1

For calculation, the curves are firstly converted to standard

normal curve

subtracting the mean from each observation then dividing them by the standard deviation

The actual calculation is a subject of Advanced Statistics

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Thank You!

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