Business Statistics, 7 Ed.: by Ken Black

Business Statistics,
th 7
ed.
by Ken Black
Chapter 1 and Chapter 2 Introduction to Statistics and Introduction to Statistics
PowerPoint presentations prepared by Lloyd Jaisingh, Morehead State University 1
Copyright 2010 John Wiley & Sons, Inc.
Learning Objectives
Define statistics Become aware of a wide range of applications of statistics in business Differentiate between descriptive and inferential statistics Classify numbers by level of data and understand why doing so is important
Statistics in Business
Accounting
auditing, audit risk and estimation of cost
Economics
regional, national, and international economic performance
Finance
Risk in investments and portfolio management
Management
human resources, compensation, and quality management
Marketing
market analysis and consumer research
What is Statistics?
Science of gathering, analyzing, interpreting, and presenting data Branch of mathematics Course of study Facts and figures Measurement taken on a sample Type of distribution being used to analyze data
Population Versus Sample

Population the whole
a collection of persons, objects, or items under study
Census gathering data from the entire population Sample a portion of the whole
a subset of the population
Population
Population and Census Data

Identifier RD1 RD2 RD3 RD4 RD5 BL1 BL2 GR1 GR2 GY1 GY2 GY3 Color Red Red Red Red Red Blue Blue Green Green Gray Gray Gray MPG 12 10 13 10 13 27 24 35 35 15 18 17
Sample and Sample Data
Identifier
Color
MPG
RD2
Red
10
RD5
Red
13
GR1
Green
35
GY2
Gray
18
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
Parameter vs. Statistic

Parameter descriptive measure of the population
Usually represented by Greek letters
Statistic descriptive measure of a sample

Usually represented by Roman letters
10
Symbols for Population Parameters

m denotes population mean
denotes population variance
denotes population standard deviation
11
Symbols for Sample Statistics
x denotes sample mean

S2 denotes sample variance
S denotes sample standard deviation
12
Process of Inferential Statistics

Calculate X to estimate m
Population
Sample x (statistic)
m
(parameter )
Select a random sample

13
Levels of Data Measurement
Nominal Lowest level of measurement Ordinal Interval Ratio Highest level of measurement
14
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
15
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
16
Ordinal Data
Faculty and staff should receive preferential treatment for parking space.
Strongly Agree Agree Neutral Disagree Strongly Disagree
17
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
18
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: Financial ratios, such as P/E Ratio, Inventory Turnover, and Quick Ratio.
19
Usage Potential of Various Levels of Data

Ratio Interval Ordinal Nominal
20
Data Level, Operations, and Statistical Methods

Data Level
Nominal Ordinal Interval
Meaningful Operations
Classifying and Counting All of the above plus Ranking All of the above plus Addition, Subtraction, Multiplication, and Division All of the above
Statistical Methods Nonparametric Nonparametric Parametric
Ratio
Parametric
21
Learning Objectives
Recognize the difference between grouped and ungrouped data Construct a frequency distribution Construct a histogram, a frequency polygon, an ogive, a pie chart, a stem and leaf plot, a Pareto chart, and a scatter plot
22
Ungrouped Versus Grouped Data

Ungrouped data
have not been summarized in any way are also called raw data
Grouped data
have been organized into a frequency distribution
23
Example of Ungrouped Data

42 30 53 50 52 30 55 49 61 74 26 58 40 40 28 36 30 33 31 37 32 37 30 32 23 32 58 43 30 29 34 50 47 31 35 26 64 46 40 43 57 30 49 40 25 50 52 32 60 54
Ages of a Sample of Managers from Urban Child Care Centers in the United States
24
Frequency Distribution
Frequency Distribution summary of data presented in the form of class intervals and frequencies
Vary in shape and design Constructed according to the individual researcher's preferences
25
Frequency Distribution
Steps in Frequency Distribution
Step 1 - Determine range of frequency distribution
Range is the difference between the high and the lowest numbers
Step 2 determine the number of classes

Dont use too many, or two few classes
Step 3 Determine the width of the class interval

Approx class width can be calculated by dividing the range by the number of classes Values fit into only one class
26
Data Range
42
26
32
34
57
30
53 50
58
40 40
37
30 32
50
47 31
30
49 40
Range = Largest - Smallest = 74 - 23 = 51
52
30 55 49
28
36 30 33
23
32 58 43
35
26 64 46
25
50 52 32
Smallest
Largest
61
74
31
37
30
29
40
43
60
54
27
Number of Classes and Class Width

The number of classes should be between 5 and 15.
Fewer than 5 classes cause excessive summarization. More than 15 classes leave too much detail.
Class Width
Divide the range by the number of classes for an approximate class width Round up to a convenient number
51 Approximate Class Width = = 8.5 6 Class Width = 10

28
Frequency Distribution of Child Care Managers Ages

Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 Frequency 6 18 11 11 3 1
29
Class Midpoint
The midpoint of each class interval is called the class midpoint or the class mark.
beginning class endpoint + ending class endpoint Class Midpoint = 2 30 + 40 = 2 = 35
1 Class Midpoint = class beginning point + class width 2 1 = 30 + 10 2 = 35

30
Relative Frequency
The relative frequency is the proportion of the total frequency that is any given class interval in a frequency distribution.
Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 Total

Relative Frequency Frequency 6 6 .12 50 18 .36 18 11 .22 50 11 .22 3 .06 1 .02 50 1.00
31
Cumulative Frequency
The cumulative frequency is a running total of frequencies through the classes of a frequency distribution.

Frequency 6 18 11 11 3 1 50
Cumulative Frequency 6 24 18 + 6 11 + 24 35 46 49 50
32
Class Midpoints, Relative Frequencies, and Cumulative Frequencies

Class Interval Frequency Midpoint Relative Frequency Cumulative Frequency
20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 Total
6 18 11 11 3 1 50
25 35 45 55 65 75
.12 .36 .22 .22 .06 .02 1.00
6 24 35 46 49 50
33
Cumulative Relative Frequencies

The cumulative relative frequency is a running total of the relative frequencies through the classes of a frequency distribution. Cumulative Relative Cumulative Relative Frequency Frequency Frequency Frequency 6 .12 6 .12 18 .36 24 .48 11 .22 35 .70 11 .22 46 .92 3 .06 49 .98 1 .02 50 1.00 50 1.00
34
Common Statistical Graphs

Histogram
vertical bar chart of frequencies
Frequency Polygon
line graph of frequencies
Ogive
line graph of cumulative frequencies
Pie Chart
proportional representation for categories of a whole
35

Stem and Leaf Plot
display is a graphical method of displaying data. It is particularly useful when your data are not too numerous.
Pareto Chart
type of chart which contains both bars and a line graph. The bars display the values in descending order, and the line graph shows the cumulative totals of each category, left to right. The purpose is to highlight the most important among a (typically large) set of factors.
36

Scatter Plot -- type of display using Cartesian coordinates to display values for two variables for a set of data.
The data is displayed as a collection of points, each having the value of one variable determining the position on the horizontal axis and the value of the other variable determining the position on the vertical axis. A scatter plot is also called a scatter chart, scatter diagram and scatter graph.
37
Histogram
Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 F 6 18 11 11 3 1
38
Frequency Polygon
Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 F 6 18 11 11 3 1
39
Ogive
Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 Cumulative Frequency 6 24 35 46 49 50
Frequency
0
0
20
40
60
10
20
30
40 Years
50
60
70
80
40
Relative Frequency Ogive

Cumulative Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 Relative Frequency .12 .48 .70 .92 .98 1.00
Cumulative Relative Frequency
1.10 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 0 10 20 30 40 Years 50 60 70 80
41
Complaints by Amtrak Passengers

COMPLAINT NUMBER PROPORTION DEGREES
Stations, etc.
Train Performance Equipment
28,000
14,700 10,500
.40
.21 .15
144.0
75.6 50.4
Personnel
Schedules, etc. Total
9,800
7,000 70,000
.14
.10 1.00
50.6
36.0 360.0
42
Complaints by Amtrak Passengers
43
Second Quarter U.S. Truck Production

Second Quarter Truck Production in the U.S. (Hypothetical values)
2d Quarter Truck Production 357,411 354,936 160,997 34,099 12,747 920,190
Company A B C D E Totals
44
Pie Chart Calculations for Company A

.388 360 =
Proportion .388 .386 .175 .037 .014 1.000 Degrees 140 139 63 13 5 360
45
Company A B C D E Totals
2d Quarter Truck Production 357,411
357, 411 = 920,190
354,936 160,997 34,099 12,747 920,190
Second Quarter U.S. Truck Production

17% 4% 1%
39% 39%
46
Safety Examination Scores for Plant Trainees

Raw Data
86 76 23 77 81 79 68 77 92 59 68 75 83 49 91 47 72 82 74 70 56 60 88 75 97 39 78 94 55 67 83 89 67 91 81
Stem
2 3 4 5 6 7 3 9 79
Leaf
569 07788 0245567789
8
9
11233689
11247
47
Construction of Stem and Leaf Plot

Raw Data
86 76 23 77 81 79 68 77 92 59 68 75 83 49 91 47 72 82 74 70 56 60 88 75 97 39
Stem
Stem
67 83 55
Leaf
3 9 79 569 07788 0245567789
2 3 4 5
Leaf
67 91 81
89
6 7
Stem
78
8
9
11233689
11247
Leaf 94
48
Pareto Chart
100 90 80 70 60 50 100% 90% 80% 70% 60% 50%
Frequency
40
30 20 10 0 Poor Wiring Short in Coil Defective Plug Other
40%
30% 20% 10% 0%
49
Scatter Plot
Registered Vehicles (1000's) 5 15 9 Gasoline Sales (1000's of Gallons) 60 120 90
Gasoline Sales
200
100
15
7
140
60
0 0 5 10 15 Registered Vehicles 20
50
Assignment
1.7, 1.8, 1.9 2.25, 2.26, 2.29, 2.34, 2.35, 2.42, 2.45
51

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Business Statistics,

Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc.

Population Versus Sample

Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc.

Population and Census Data

Copyright 2010 John Wiley & Sons, Inc.

Sample and Sample Data

Copyright 2010 John Wiley & Sons, Inc.

Descriptive vs. Inferential Statistics

Copyright 2010 John Wiley & Sons, Inc.

Parameter vs. Statistic

Statistic descriptive measure of a sample

Copyright 2010 John Wiley & Sons, Inc.

Symbols for Population Parameters

denotes population variance

denotes population standard deviation

Copyright 2010 John Wiley & Sons, Inc.

Symbols for Sample Statistics

x denotes sample mean

S denotes sample standard deviation

Copyright 2010 John Wiley & Sons, Inc.

Process of Inferential Statistics

Select a random sample

Levels of Data Measurement

Copyright 2010 John Wiley & Sons, Inc.

Nominal Level Data

Copyright 2010 John Wiley & Sons, Inc.

Ordinal Level Data

Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc.

Interval Level Data

Example: Fahrenheit Temperature

Copyright 2010 John Wiley & Sons, Inc.

Ratio Level Data

Copyright 2010 John Wiley & Sons, Inc.

Usage Potential of Various Levels of Data

Copyright 2010 John Wiley & Sons, Inc.

Data Level, Operations, and Statistical Methods

Statistical Methods Nonparametric Nonparametric Parametric

Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc.

Ungrouped Versus Grouped Data

Copyright 2010 John Wiley & Sons, Inc.

Example of Ungrouped Data

Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc.

Step 2 determine the number of classes

Step 3 Determine the width of the class interval

Copyright 2010 John Wiley & Sons, Inc.

Range = Largest - Smallest = 74 - 23 = 51

Copyright 2010 John Wiley & Sons, Inc.

Number of Classes and Class Width

51 Approximate Class Width = = 8.5 6 Class Width = 10

Frequency Distribution of Child Care Managers Ages

Copyright 2010 John Wiley & Sons, Inc.

1 Class Midpoint = class beginning point + class width 2 1 = 30 + 10 2 = 35

Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 Total

Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 Total