[Link].

2nd YEAR/ III SEMESTER DATE: 14/09/2020

SUB: BUSINESS STATISTICS UNIT-I PART – 4
TOPIC- LIMITATIONS OF STATISTICS

AN INTRODUCTION TO BUSINESS STATISTICS

INTRODUCTION

For a layman,‘Statistics’ means numerical information expressed in quantitative terms. This

information may relate to objects, subjects, activities, phenomena, or regions of space. As a
matter of fact, data have no limits as to their reference, coverage, and scope. At the macro level,
these are data on gross national product and shares of agriculture, manufacturing, and services in
GDP (Gross Domestic Product). At the micro level, individual firms, howsoever small or large,
produce extensive statistics on their operations. The annual reports of companies contain variety
of data on sales, production, expenditure, inventories, capital employed, and other activities.
These data are often field data, collected by employing scientific survey techniques. Unless
regularly updated, such data are the product of a one-time effort and have limited use beyond the
situation that may have called for their collection. A student knows statistics more intimately as a
subject of study like economics, mathematics, chemistry, physics, and others. It is a discipline,
which scientifically deals with data, and is often described as the science of data. In dealing with
statistics as data, statistics has developed appropriate methods of collecting, presenting,
summarizing, and analysing data, and thus consists of a body of these methods.

MEANING AND DEFINITIONS OF STATISTICS

In the beginning, it may be noted that the word ‘statistics’ is used rather curiously in two senses
plural and singular. In the plural sense, it refers to a set of figures or data. In the singular sense,
statistics refers to the whole body of tools that are used to collect data, organise and interpret
them and, finally, to draw conclusions from them. It should be noted that both the aspects of
statistics are important if the quantitative data are to serve their purpose. If statistics, as a subject,
is inadequate and consists of poor methodology, we could not know the right procedure to
extract from the data the information they contain. Similarly, if our data are defective or that they
are inadequate or inaccurate, we could not reach the right conclusions even though our subject is
well developed.

A.L. Bowley has defined statistics as: (i) statistics is the science of counting, (ii) Statistics may
rightly be called the science of averages, and (iii) statistics is the science of measurement of
social organism regarded as a whole in all its manifestations.

Boddington defined as: Statistics is the science of estimates and probabilities.

Further, W.I. King has defined Statistics in a wider context, the science of Statistics is the
method of judging collective, natural or social phenomena from the results obtained by the
analysis or enumeration or collection of estimates.

Seligman explored that statistics is a science that deals with the methods of collecting,
classifying, presenting, comparing and interpreting numerical data collected to throw some light
on any sphere of enquiry.

Spiegal defines statistics highlighting its role in decision-making particularly under uncertainty,
as follows: statistics is concerned with scientific method for collecting, organising, summa
rising, presenting and analyzing data as well as drawing valid conclusions and making
reasonable decisions on the basis of such analysis.

Prepared by SUMIT BAIN

Guest Faculty, Dept. Of Commerce, JNRM
[Link]. 2nd YEAR/ III SEMESTER DATE: 14/09/2020
SUB: BUSINESS STATISTICS UNIT-I PART – 4
TOPIC- LIMITATIONS OF STATISTICS

According to Prof. Horace Secrist, Statistics is the aggregate of facts, affected to a marked
extent by multiplicity of causes, numerically expressed, enumerated or estimated according to
reasonable standards of accuracy, collected in a systematic manner for a pre-determined purpose,
and placed in relation to each other.

Major characteristics of statistics as follows:

1. It consists of aggregates of facts:

In the plural sense, statistics refers to data, but data to be called statistics must consist of
aggregate of certain facts. A single and isolated fact or figure like, 60 Kgs. weight of a student or
the death of a particular person on a day does not amount to statistics.
For a data may amount to statistics it must be in the form of a set or aggregate of certain facts,
viz. 50, 65, 70 Kgs. Weight of students in a class or profits of a firm over different times etc. is
liable to be effected by multiplicity of causes.
2. It is effected by many causes:
It is not easy to study the effects of one factor only by ignoring the effects of other factors. Here
we have to go for the effects of all the factors on the phenomenon separately as well as
collectively, because effects of the factors can change with change of place, time or situation.
Here, the overall effect is taken and not of one factor only as in other natural sciences. For
example, we can say that result of class XII in board examination does not depend on any single
factor but collectively on standard of teachers, teaching methods, teaching aids, practical’s
performance of students, standard of question papers and as well as of evaluation.
3. It should be numerically expressed:
A data to be called statistics should be numerically expressed so that counting or measurement of
data can be made possible. It means that the data or the fact to constitute statistics must be
capable of being expressed in some quantitative form as weights of 60, 70, 100 and 90 Kg. or
profits of Rs. 10,000, Rs. 20,000 etc. Thus these data must contain numerical figures so that
those may be called as numerical statement of facts.
4. It must be enumerated or estimated accurately:
As stated above that the statements should be precise and meaningful. For getting reasonable
standard of accuracy the field of enquiry should not be very large. If it is infinite or very large,
even enumeration of data is impossible and reasonable standard of accuracy may not be
achieved. To achieve it we have to make on estimate according to reasonable standard of
accuracy depending upon the nature and purpose of collection of data. e.g. we may measure the
height of buildings in metres but we cannot measure the length of small things like bricks in the
same unit of meter.
5. It should be collected in a systematic manner:
Another characteristic of statistics is that the data should be collected in a systematic manner.
The data collected in a haphazard manner will lead to difficulties in the process of analysis, and
wrong conclusions. A proper plan should be made and trained investigators should be used to
collect data so that they may collect statistics. If it is not done, in such cases reliability of data
gets decreased. So to get correct results the data must be collected in a precise manner.
6. It should be collected for a predetermined purpose:
Before we start the collection of data, we must be clear with the purpose for which we are
collecting the data. If we have no information about its purpose, we may not be collecting data
according to the needs. We may need some more relevant data to achieve the required purpose,
which we would miss in the event of its ignorance.
Suppose we want to get data on imports and exports, we have to know about various segments
such as electronics, consumer articles, grains and such other segregations also. If some person on
govt. duty is counting the vehicles passing through a road in a unit time is statistics, but same
2

Prepared by SUMIT BAIN

Guest Faculty, Dept. Of Commerce, JNRM
[Link]. 2nd YEAR/ III SEMESTER DATE: 14/09/2020
SUB: BUSINESS STATISTICS UNIT-I PART – 4
TOPIC- LIMITATIONS OF STATISTICS

work done by any other person not related to this field, is not statistics because the former is
doing it for the Government which wants to make it four lane road-if needed.
7. It should be capable of being placed in relation to each other:
It is last but not less important of the characteristics of the statistics. The collection of data is
generally done with the motive to compare. If the figures collected are not comparable, in that
case, they lose a large part of their significance.
It means, the figures collected should be homogeneous for comparison and not heterogeneous.
For example, Heterogeneous data like sale of Rs. 20,000 result of 80% cases and mileage of 80
kms can never be placed in relation to each other and compared for analysis and interpretation
which is the ulterior motive of the science of statistics. It can be concluded that all statistics are
numerical data but all numerical data are not statistics unless they satisfy all the essential
characteristics of statistics, depicted as above.

TYPES OF DATA AND DATA SOURCES

Statistical data are the basic raw material of statistics. Data may relate to an activity of our
interest, a phenomenon, or a problem situation under study. They derive as a result of the process
of measuring, counting and/or observing. Statistical data, therefore, refer to those aspects of a
problem situation that can be measured, quantified, counted, or classified. Any object subject
phenomenon, or activity that generates data through this process is termed as a variable. In other
words, a variable is one that shows a degree of variability when successive measurements are
recorded. In statistics, data are classified into two broad categories: quantitative data and
qualitative data. This classification is based on the kind of characteristics that are measured.
Data may be qualitative or quantitative. Once you know the difference between them, you can
know how to use them.

(A). Qualitative Data: They represent some characteristics or attributes. They depict
descriptions that may be observed but cannot be computed or calculated. For example, data on
attributes such as intelligence, honesty, wisdom, cleanliness, and creativity collected using the
students of your class a sample would be classified as qualitative. They are more exploratory
than conclusive in nature. Depending on the nature of the variable observed for measurement,
quantitative data can be further categorized as continuous and discrete data.
Obviously, a variable may be a continuous variable or a discrete variable.
(i) Continuous data represent the numerical values of a continuous variable. A
continuous variable is the one that can assume any value between any two points on a
line segment, thus representing an interval of values. The values are quite precise and
close to each other, yet distinguishably different. All characteristics such as weight,
length, height, thickness, velocity, temperature, tensile strength, etc., represent
continuous variables. Thus, the data recorded on these and similar other characteristics
are called continuous data. It may be noted that a continuous variable assumes the finest
unit of measurement. Finest in the sense that it enables measurements to the maximum
degree of precision.
3

Prepared by SUMIT BAIN

Guest Faculty, Dept. Of Commerce, JNRM
[Link]. 2nd YEAR/ III SEMESTER DATE: 14/09/2020
SUB: BUSINESS STATISTICS UNIT-I PART – 4
TOPIC- LIMITATIONS OF STATISTICS

(ii) Discrete data are the values assumed by a discrete variable. A discrete variable is the
one whose outcomes are measured in fixed numbers. Such data are essentially count data.
These are derived from a process of counting, such as the number of items possessing or
not possessing a certain characteristic. The number of customers visiting a departmental
store everyday, the incoming flights at an airport, and the defective items in a
consignment received for sale, are all examples of discrete data.
(B). Quantitative Data: These can be measured and not simply observed. They can be
numerically represented and calculations can be performed on them. For example, data on the
number of students playing different sports from your class gives an estimate of how many of the
total students play which sport. This information is numerical and can be classified as
quantitative. These data are further classified as nominal and rank data.
Nominal data are the outcome of classification into two or more categories of items or
units comprising a sample or a population according to some quality characteristic.
Classification of students according to sex (as males and females), of workers according
to skill (as skilled, semi-skilled, and unskilled), and of employees according to the level
of education (as matriculates, undergraduates, and post-graduates), all result into nominal
data. Given any such basis of classification, it is always possible to assign each item to a
particular class and make a summation of items belonging to each class. The count data
so obtained are called nominal data.
Rank data, on the other hand, are the result of assigning ranks to specify order in terms of
the integers 1,2,3, ..., n. Ranks may be assigned according to the level of performance in a
test. a contest, a competition, an interview, or a show. The candidates appearing in an
interview, for example, may be assigned ranks in integers ranging from I to n, depending
on their performance in the interview. Ranks so assigned can be viewed as the continuous
values of a variable involving performance as the quality characteristic.

Data sources
Data sources could be seen as of two types, viz., secondary and primary. The two can be defined
as under:
(i) Secondary data: They already exist in some form: published or unpublished - in an
identifiable secondary source. They are, generally, available from published source(s), though
not necessarily in the form actually required.
(ii) Primary data: Those data which do not already exist in any form, and thus have to be
collected for the first time from the primary source(s). By their very nature, these data require
fresh and first-time collection covering the whole population or a sample drawn from it.

TYPES OF STATISTICS
There are two major divisions of statistics such as descriptive statistics and inferential statistics.
Descriptive Statistics
Descriptive Statistics refers to a discipline that quantitatively describes the important
characteristics of the dataset. For the purpose of describing properties, it uses measures of central
tendency, i.e. mean, median, mode and the measures of dispersion i.e. range, standard deviation,
quartile deviation and variance, etc. The data is summarized by the researcher, in a useful way,
4

Prepared by SUMIT BAIN

Guest Faculty, Dept. Of Commerce, JNRM
[Link]. 2nd YEAR/ III SEMESTER DATE: 14/09/2020
SUB: BUSINESS STATISTICS UNIT-I PART – 4
TOPIC- LIMITATIONS OF STATISTICS

with the help of numerical and graphical tools such as charts, tables, and graphs, to represent
data in an accurate way. Moreover, the text is presented in support of the diagrams, to explain
what they represent.
Inferential Statistics
Inferential Statistics is all about generalising from the sample to the population, i.e. the results of
the analysis of the sample can be deduced to the larger population, from which the sample is
taken. It is a convenient way to draw conclusions about the population when it is not possible to
query each and every member of the universe. The sample chosen is a representative of the entire
population; therefore, it should contain important features of the population.
Inferential Statistics is used to determine the probability of properties of the population
on the basis of the properties of the sample, by employing probability theory. The major
inferential statistics are based on the statistical models such as Analysis of Variance, chi-square
test, student’s t distribution, regression analysis, etc. Methods of inferential statistics:
• Estimation of parameters
• Testing of hypothesis

Differences between Descriptive and Inferential Statistics

The difference between descriptive and inferential statistics can be drawn clearly on the
following grounds:
1. Descriptive Statistics is a discipline which is concerned with describing the population
under study. Inferential Statistics is a type of statistics; that focuses on drawing
conclusions about the population, on the basis of sample analysis and observation.

2. Descriptive Statistics collects, organises, analyzes and presents data in a meaningful way.
On the contrary, Inferential Statistics, compares data, test hypothesis and make
predictions of the future outcomes.

3. There is a diagrammatic or tabular representation of final result in descriptive statistics

whereas the final result is displayed in the form of probability.

4. Descriptive statistics describes a situation while inferential statistics explains the

likelihood of the occurrence of an event.

5. Descriptive statistics explains the data, which is already known, to summarise sample.
Conversely, inferential statistics attempts to reach the conclusion to learn about the
population; that extends beyond the data available.

BASIS FOR DESCRIPTIVE INFERENTIAL

COMPARISON STATISTICS STATISTICS

Meaning Descriptive Statistics is Inferential Statistics is a type

that branch of statistics of statistics, that focuses on
which is concerned with drawing conclusions about
describing the population the population, on the basis
under study. of sample analysis and
observation.

What it does? Organize, analyze and Compares, test and predicts

5
present data in a data.
meaningful way.

Form of final Charts, Graphs and Probability

Result Tables
Prepared by SUMIT BAIN
Guest Faculty, Dept. Of Commerce, JNRM
Usage To describe a situation. To explain the chances of
occurrence of an event.

Function It explains the data, It attempts to reach the

which is already known, conclusion to learn about the
to summarize sample. population, that extends
beyond the data available.
[Link]. 2nd YEAR/ III SEMESTER DATE: 14/09/2020
SUB: BUSINESS STATISTICS UNIT-I PART – 4
TOPIC- LIMITATIONS OF STATISTICS

Prepared by SUMIT BAIN

Guest Faculty, Dept. Of Commerce, JNRM
[Link]. 2nd YEAR/ III SEMESTER DATE: 14/09/2020
SUB: BUSINESS STATISTICS UNIT-I PART – 4
TOPIC- LIMITATIONS OF STATISTICS

FUNCTIONS OF STATISTICS

Let us now discuss some of the important functions of statistics:

1. To present facts in a proper form: Statistical methods present general statements
in a precise and definite form. For example, you may say that in India average yield
of cotton per hectare is 180 Kg. This statement is more precise and convincing than
saying that the average yield of cotton in India is very low.
2. To simplify unwieldy and complex data: Statistical methods simplify unwieldy
and complex data to make them understandable easily. The raw data is often
unintelligible. One cannot grasp their characteristics unless the data is classified
according to some common characteristics. Suppose, you are given the weekly
wages of 1,000 workers in a factory. You will not be in a position to draw any
inference from the data unless they are condensed through classification such as the
following:
Weekly Wages No. Of workers

Below -600 100

600-700 200

700-800 400

800-900 200

Above 900 100

Total: 1000

3. To provide the technique for making comparison: The primary purpose of

statistics is to facilitate a comparative study of different phenomena either over time
or space. For instance, the estimation of national income is not done for its own
sake. But it is done to compare the income over time to get an idea whether the
standard of living of people is rising or not. Suppose, as compared to 1987, the per-
capita income in India has increased by 10% in 1988. On the basis of this
information, we shall be in a position to throw some light on the standard of living
of an Indian in 1988.
4. To formulate policies in different fields: Statistical methods are very useful in
formulating various policies in social, economic, and business fields. The
government for instance, utilises vital statistical data for formulating family
planning programme. Similarly, the government utilises the information on
consumer price indices for granting dearness allowance to its employees.
5. To study relationship between different phenomena: Statistical measures such
as correlation and regression are used to study relationships between variables.
Such relationships are important for making decisions. For instance, you may find a
relationship between the demand of a product and its prices. In general, if the prices
rise, the demand for the product is likely to decline.
7

Prepared by SUMIT BAIN

Guest Faculty, Dept. Of Commerce, JNRM
[Link]. 2nd YEAR/ III SEMESTER DATE: 14/09/2020
SUB: BUSINESS STATISTICS UNIT-I PART – 4
TOPIC- LIMITATIONS OF STATISTICS

6. To forecast future values: Some of the statistical techniques are used for

forecasting future values of a variable. On the basis of sales figures of the last 10
years, a marketing manager can estimate the likely demand for his product during
the next year.
7. To measure uncertainty: With the help of probability theory, you can measure the
chance of occurrence of uncertain event. Probability concepts are quite useful in
decision-making. Suppose, if you are interested in estimating the chance of your
passing the [Link] examination, you may get an idea about it by studying the pass
percentages of students during the last 10 years.
8. To test a hypothesis: Statistical methods are extremely useful in formulating and
testing hypotheses and for the development of new theories. For instance, a
company is desirous of knowing the effectiveness of its new drug to control malaria.
It could do so by using a statistical technique called Chi-square Test.
9. To draw valid inferences: Statistical methods are also useful in drawing inferences
regarding the characteristics of the universe (population) on the basis of sample
data.

Prepared by SUMIT BAIN

Guest Faculty, Dept. Of Commerce, JNRM
[Link]. 2nd YEAR/ III SEMESTER DATE: 14/09/2020
SUB: BUSINESS STATISTICS UNIT-I PART – 4
TOPIC- LIMITATIONS OF STATISTICS

Limitations of Statistics
Though statistics is an important instrument of quantitative method and research in
social sciences, physical science and life sciences, it suffers from a number of limitations.
The following are the main limitations of statistics:
(1) Absence of uniformity: In any statistical inquiry the data obtained are heterogeneous
in nature. Statistical methods alone cannot bring in perfect uniformity. Generally results
obtained need not be uniform and hence will serve no purpose.
(2) Statistics does not study individuals: Statistics deals only with aggregate of facts.
Hence, single figures, however important they might be, cannot be taken up within the
purview of statistics. For example, the marks obtained by X student of a class are not
the subject-matter of statistics but the average marks has statistical relevance.
(3) Statistical results speak about only average: Prof. A. L. Bowley has rightly remarked
that Statistics is a science of average. It implies that statistical results are true only on
average. For example, if we say that per capita income in India is Rs. 12,000 per annum,
it does not mean that the per capita income of the members of the Birla’s family and the
income of the poor fellows who sleep in the slum area are equal. Therefore, averages
give only contradicting results.
(4) Statistics can be misused: Statistics is misused very often in the sense that a corrupt
man can always prove all that he wants to do by using false statistics. In the words of
W. I. King, “One of the shortcomings of statistics is that they do not, bear on their face
the label of their quality.”
(5) Laws are not stable: The statistical laws are obtained on the basis of information
available at one stage need not be true at another stage. The basic data changes and

Prepared by SUMIT BAIN

Guest Faculty, Dept. Of Commerce, JNRM
[Link]. 2nd YEAR/ III SEMESTER DATE: 14/09/2020
SUB: BUSINESS STATISTICS UNIT-I PART – 4
TOPIC- LIMITATIONS OF STATISTICS

hence the basic laws governing them also change. Moreover, what is applicable to India
need not be true in Japan.
(6) Statistics cannot be applied to qualitative statistics: The Statistic studies cannot be
applied to qualitative attributes like good, bad, beautiful etc. For a whole sum coverage,
the statistical tools must be applicable for quantitative and qualitative data.

10

Prepared by SUMIT BAIN

Guest Faculty, Dept. Of Commerce, JNRM