MBST51112: Business Statistics

by
MrJaden Pieterse
Topic 1: Descriptive Statistics (Exploratory
Data Analysis)
In this topic, we are going to cover:
• Statistics in Accounting and Economics
• Introduction and importance of Statistics
• Sampling
• Types of Data
• Graphs and diagrams
• Frequency distribution and related graphs
• Measures of Central Tendency
• Measures of Variability (variation, spread, dispersion)
• Coefficient of Variation
• Bell-shaped data
• Measures of Position – Percentiles
• Five-number summary and Box-Whisker plot
Let’s take a look
 Statistics in Accounting and Economics
❑ Statistics help accountants ❑ In economics, statistics is used to
summarise, analyse, and interpret understand, explain, and predict
financial data to support financial economic behaviour at both micro and
decisions in a business. macro levels.
❑ Real-life applications include: ❑ Real-life applications include:
1. Financial reporting: Averages and 1. Economic indicators: GDP, inflation,
ratios to summarise revenue, costs, unemployment rates
and profits 2. Demand and supply: Study
2. Risk management: Measuring consumer behaviour using data.
financial risk and variability in cash 3. Policy evaluation: Assessing the
flows. impact of interest rates or tax
3. Budgeting & forecasting: Using past changes.
financial data to predict future 4. Economic forecasting: Predicting
income and expenses growth, inflation, or recession
trends.
 Introduction & Importance of Statistics
❑ Statistics is the science of collecting, organising, analysing, and
interpreting data. Moreover, it helps convert raw data into meaningful
information and supports decision-making under uncertainty.
❑ Statistics in business play a critical role in:
1. Improving operational efficiency
2. Supporting strategic planning
3. Analysing customer behaviour
4. Measuring*** business performance
5. Managing financial and operational risk
 Introduction & Importance of Statistics
❑ “Statistics; the grammar of science.” The single most
important figure in 20th-
❑ “Data is the new science. BigDATA holds the answers.” century statistics, also
known as the godfather
of modern statistics

Carl F. Gauss made Karl Pearson, a founder of

major contributions to mathematical statistics.
Bernoulli was the first to probability, leading to
deal with probability statistics.
 Problems
1. Explain the role of statistics in financial reporting.
2. Why is statistical analysis important in financial forecasting?
3. Explain the importance of statistics in measuring economic performance and analysing
demand and supply.
4. Discuss the role of economists in using data to advise government policy.
5. Describe one way in which the misuse of statistics can affect accounting decisions.
6. State any three reasons why statistics are important in modern business.
7. Explain the difference between descriptive statistics and inferential statistics.

Discussion
a) Explain how statistics links accounting and economics in business decision-making.
b) Discuss why poor-quality data can lead to incorrect economic or financial decisions.
c) Explain the difference between intuition-based and data-driven decision making.
d) Explain how the ethical use of statistics is important in accounting and economics.
 Sampling
❑ Sampling is the process of selecting a subset of a population to
represent the entire population.
❑ This is important because studying the whole population is
often time-consuming, costly, or impractical.
We ask two important questions:
1. How big must the sample be?
2. How do we choose these sample
elements?
Sampling cont.
Sampling cont.
 Sampling
Methods
1. Probability Sampling
❑ Simple random sampling: For example, you want to select a simple
random sample of 1000 employees of a social media marketing company.
You assign a number to every employee in the company database from 1
to 1000, and use a random number generator to select 100 numbers.
❑ Stratified Sampling: Stratified sampling involves dividing the population
into subpopulations that may differ in important ways. It allows you draw
more precise conclusions by ensuring that every subgroup is properly
represented in the sample.
To use this sampling method, you divide the population into subgroups
(called strata) based on the relevant characteristic (e.g., gender identity, age
range, income bracket, job role).
 Sampling Methods Conti.
❑ Systematic sampling: Example, all employees of the company are listed in
alphabetical order. From the first 10 numbers, you randomly select a starting
point: number 6. From number 6 onwards, every 10th person on the list is
selected (6, 16, 26, 36, and so on), and you end up with a sample of 100
people.
❑ Cluster sampling: Cluster sampling also involves dividing the population into
subgroups, but each subgroup should have similar characteristics to the whole
sample. Instead of sampling individuals from each subgroup, you randomly
select entire subgroups. For example, the company has offices in 10 cities
across the country (all with roughly the same number of employees in similar
roles). You don’t have the capacity to travel to every office to collect your data,
so you use random sampling to select 3 offices – these are your clusters.
 Sampling Methods. Conti
2. Non
-Probability Sampling
❑ Purposive or judgemental sampling: This type of sampling, also known as
judgement sampling, involves the researcher using their expertise to select a
sample that is most useful to the purposes of the research. For example, you
want to know more about the opinions and experiences of disabled students at
your university, so you purposefully select a number of students with different
support needs in order to gather a varied range of data on their experiences
with student services.
❑Convenience sampling: A convenience sample simply includes the individuals
who happen to be most accessible to the researcher. For example, you are
researching opinions about student support services in your university, so after
each of your classes, you ask your fellow students to complete a survey on the
topic. This is a convenient way to gather data, but as you only surveyed students
taking the same classes as you at the same level, the sample is not
representative of all the students at your university.
Sampling Methods Conti.

Technique Main Purpose Key Difference

Simple Everyone equal

Fair selection
Random chance
Easy and Uses fixed
Systematic
structured interval
Divides by
Stratified Representation
characteristics
Divides by
Cluster Cost-effective
location/group
 Or just think
Take a sip of about your
water or boyfriend or
stretch!!! girlfriend

Commercial Break!
5min
Types of Data
 Types of data: Scale of Measurement
❑ Scales of measurement: the variables or numbers are defined and categorized using
different scales of measurement. Each level of measurement scale has specific
properties that determine the various uses of statistical analysis.
❑ There are four different scales of measurement, namely, (1) nominal scale, (2) ordinal
scale, (3) interval scale, and (4) Ratio Scale
 Types of data: Scale of Measurement
1. Nominal Scale: A nominal scale is the 1st level of measurement scale in which the
numbers serve as “tags” or “labels” to classify or identify the objects. A nominal
scale usually deals with the non-numeric variables.
2. Ordinal Scale: The ordinal scale is the 2nd level of measurement that reports the
ordering and ranking of data without establishing the degree of variation between
them. Ordinal represent the “order”. Ordinal data is known as qualitative or
categorical data.
3. Interval Scale: The interval scale is the 3rd level of measurement scale. It is defined
as a quantitative measurement scale in which the difference between the two
variables is meaningful. In other words, the variables are measured in an exact
manner, not as in a relative way in which the presence of zero is arbitrary.
4. Ratio Scale: The ratio scale is the 4th level of measurement scale, which is
quantitative. It is a type of variable measurement scale. It allows researchers to
compare the differences or intervals.
 Problems
1. Describe the terms sampling, population, and sample.
2. State one reason why sampling is used instead of a census.
3. Name the sampling methods, and provide an example of each.
4. State whether the following statements are TRUE or FALSE:
(a) A sample always includes the entire population.
(b) Sampling saves time and cost.
5. What is data?
6. What are the four scales of measurement?
7. Distinguished between qualitative and quantitative data.
8. Define discrete and continuous data.
9. State whether the following is discrete or continuous data:
(a) The number of employees
(b) Weight of a particular product.
 Problems
Self-evaluation exercise
1. A financial analyst is interested in estimating the average overtime hours worked by employees in a
large corporation. The analyst randomly selects three departments and collects data from all
employees within each selected department. Identify the sampling technique applied:
i. Simple random sampling
ii. Stratified sampling
iii. Systematic sampling
iv. Cluster Sampling
2. Which of the following sampling methods are examples of random sampling?
i. An auditor chooses the ten largest transactions every data of checking a business books.
ii. By using numbered balls which are drawn blindly, a sample of 200 statistics students is chosen from
all the statistics students SPU to determine their attitudes about the subject.
iii. All Accounting students are given questionnaires. The questionnaire aims to determine the extent of
SPU students’ knowledge about the South African Bill of Rights.
3. A company has 730 employees, of which 482 are male. A proportionally stratified sample of size 80
must be drawn from the employees. The genders of the employees are used as strata. Compute the
number of women who should be included in the sample.
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 Graphs
and Diagrams
Types of Diagrams
There are many types of diagrams that are used for data presentation. Some popular types of diagrams
are explained below:
1. Line Diagram
In a line diagram, you can represent different values using lines of varying lengths. Further, these lines are
either horizontal or vertical.
Example 1:
The income of 10 workers in a particular week was recorded as given below. Represent the data by a line
diagram.

When will a line graph be misleading?

 Graphs and Diagrams
2. Simple Bar Diagram
A bar graph is a visual representation of grouped data using rectrangular bars. The
length of each bar is proportional to the value is represents. The horizontal axis
represents categorical data, while the vertical axis represents numerical data. Bar
graphs are commonly used for comparing different categories within a dataset.
Example 2:
Represent the following data using a bar diagram:
 Graphs and Diagrams
3. Multiple Bar Diagram
We use multiple bar diagram or a compound bar diagram when we want to show a comparison
between two or more sets of data.
Example 3
Represent the following data on the faculty-wise distribution of students using a multiple bar
diagram:
 What are the limitations of
Graphs and Diagrams pie charts in business
reporting?
4. Pie Chart
A pie chart is a popular and visually intuitive tool, making complex information easier to understand at a
glance. This circular graphs divides into slices, each representing a proportion of the whole, allowing for a
clear comparison of different categories.
Example 4
In a class of 200 students, a survey was conducted to collect each students’ favourite sport. Use the data
below to construct a pie chart.

34
200
× 100 = 17% for Cricket
 Graphs and Diagrams
5. Histograms
A histogram is a type of bar graph that represents the frequency of numerical data within specific
intervals. Unlike a standard bar graph, the bars in a histogram are adjacent, representing continuous data
distribution. It is commonly used for showing distributions such as test scores, heights, or population
data.
Example 3
Consider the case of the data given below in the table that shows the data obtained in a class test of 35
students:

Why would a histogram be inappropriate

for categorical data?
 Problems
Self-evaluation exercise
1. A company sells four products with the following quarterly sales (units):
Product Units Sold
A 500
B 650
C 400
D 750

i. From the data above, construct a bar graph showing the sales of each product. Month Sales
ii. Identify the best and worst-performing products. Jan 120

2. A company recorded the following monthly sales (in R’000): Feb 135
Mar 150
i. Construct a line graph to represent the sales trend.
Apr 140
ii. Describe the overall trend in sales, and identify any month where sales declined.
May 160
Jun 175
 Problems
Self-evaluation exercise
3. A company’s monthly expenses are: 4. The salaries (R’000) of 40 employees are
Expense Type Amount (R) grouped as follows:
Salaries 50,000 Salary
Frequency
Range
Rent 20,000
10–20 5
Utilities 10,000
20–30 8
Marketing 15,000
30–40 12
Transport 5,000
40–50 10
i. Calculate the percentage of total expenses for 50–60 5
each category. i. Construct a histogram using the data above.
ii. Construct a pie chart representing the expense ii. Which salary range has the highest frequency,
distribution and indicate which expense takes and what can management conclude about the
the largest share. salary structure
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 Thank you!
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