CHAPTER ONE

STATISTICS REFRESHER
1.1. INTRODUCTION
Although statistical data have been collected for thousands of years, very early efforts typically
involved simply counting people or possessions to facilitate taxation.
It is coming to be the rule to use statistics and to think statistically. The larger business units not
only have their own statistical departments in which they collect and interpret facts about their
own affairs, but they themselves are consumers of statistics collected by others. The trade press
and government documents are largely statistical in character, and this is necessarily so, since
only by the use of statistics can the affairs of business and of state be intelligently conducted.
Business needs a record of its past history with respect to sales, costs, sources of materials,
market facilities, etc. Its condition, thus reflected, is used to measure progress, financial standing,
and economic growth. A record of business changes –of its rise and decline and of the sequence
of forces influencing it – is necessary for estimating future developments.
Today, statistics and its applications are an integral part of our lives. In such diverse settings as
politics, medicine, education, business, and the legal arena, human activities are both measured
and guided by statistics.
Therefore, this chapter has an aim to refresh the students with the basic concepts and terms of
statistics such as, the meaning of statistics, areas of statistics, and descriptive statistics before
proceeding to its applications in business.
Objectives the chapter

‘Define statistics
 Differentiate between descriptive and inferential statistics
 Apply the descriptive statistics on practical exercises.

1.2. BASIC CONCEPTS OF STATISTICS

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  Explain the importance of statistics in business decision making
1.2.1. DEFINITION OF STATISTICS
Dear student, can you define the term statistics?
Briefly defined, statistics can be described as the collection, summarization, analysis, and
reporting of numerical findings relevant to a business decision or situation.
Statistics can also be defined as statistical data which refers to the numerical description of the
quantitative aspects of a phenomenon. They take the form of counts or measurements. Since
any figure or set of figures, cannot be called statistics owing to many considerations which
decide its use, statistical data or mere data is a more appropriate expression to indicate numerical
facts.
Let us take some few definitions which describe the characteristics of statistics again to have a
clear understanding.
Webster : The classified facts respecting the condition of the people in a state … especially
those facts which can be stated in numbers or in tables of numbers or in any tabular or classified
arrangement. -
This definition is quite narrow as it confines the scope of statistics only to such facts and figures
which are related to the conditions of the people in a state.
Yule and Kendall: By statistics we mean quantitative data affected to a marked extent by
multiplicity of causes
Horace Secrist: By statistics we mean aggregates 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 predetermined purpose and placed in
relation to each other. -
The definition given by Horace is comprehensive than those of Yule and Kendall. This definition
highlights the following important characteristics
(i) Statistics are aggregates of facts
(ii) Statistics are affected to a marked extent by multiplicity of causes
(iii) Statistics are numerically expressed
(iv) Statistics are enumerated or estimated according to reasonable standards of accuracy
(v) Statistics are collected in a systematic manner for a pre-determined purpose, and
(vi) Statistics are placed in relation to each other.

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 1.3. DESCRIPTIVE VERSUS INFERENTIAL STATISTICS
As we have seen, statistics can refer to a set of individual numbers or numerical facts, or to
general or specific statistical techniques. A further breakdown of the subject is possible,
depending on whether the emphasis is on (1) simply describing the characteristics of a set of data
or (2) proceeding from data characteristics to making generalizations, estimates, forecasts, or
other judgments based on the data. The former is referred to as descriptive statistics, while the
latter is called inferential statistics.
A. Descriptive Statistics
In descriptive statistics, we simply summarize and describe the data we have collected. For
example, up on looking around your class, you may find that 35% of your fellow students are
wearing Casio watches. If so the figure “35%” is a descriptive’ statistic: You are not attempting
to suggest that 35% of all College students in Ethiopia, or even at your school, wear Casio
watches. You are merely describing the data that you have recorded.
B. Inferential Statistics
In inferential statistics, sometimes referred to as inductive statistics, we go beyond mere
description of the data and arrive at inferences regarding the phenomena or phenomenon for
which sample data were obtained.
Key Terms for Inferential Statistics
In surveying the political choices of a small number of voters, political pollsters are using a
sample of voters selected from the population all eligible voters. Based on the results observed in
the sample, the researchers then proceed to make inferences on the political choices likely to
exist in this larger population of eligible voters. A sample result (e.g., 46% of the sample favor
the existing ruling party) is referred to as a sample statistic and is used in an attempt to estimate
the corresponding population parameter (e.g.: the actual but unknown, national percentage of
voters who favor the current ruling party). These and other important terms from inferential
statistics may be defined as follows:
 Population: sometimes referred to as the universe, this is the entire people or objects of
interest. A population may refer to things as well as people. Before beginning a study, it is
important to clearly define the population involved.

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 Sample: This is a smaller number (a subset) of the people or objects that exist within the
larger population. A sample is said to be representative if its members tend to have the same
characteristics as the population from which they were selected. When a sample is so large as
to include all members of the population, it is referred to as a complete census.
 Statistic: This is a measured characteristic of the sample. For example, our retailer may find
that 73% of the sample members rate the store as having higher quality merchandise than the
competitor across the street. The sample statistic can be a measure of typical ness or central
tendency, such as the mean, median, mode or proportion, or it may be a measure of spread or
dispersion, such as the range, variance and standard deviation.
 Parameter: This is a numerical characteristic of the population. If we were to take a
complete census of the population, the parameter could actually be measured. The purpose of
the sample statistic is to estimate the value of the corresponding population parameter (e.g.
the sample mean is used to estimate the populations mean). Typical parameters include the
population mean, median, proportion, and standard deviation.
1.4. STATISTICS IN BUSINESS DECISIONS / IMPORTANCE OF STATISTICS
One aspect of business in which statistics plays an especially vital role is decision making.
Many international companies depend on the use of statistical information during business
decision making to reduce the risk involved with plant– expansions, new product development,
personnel selection, quality assurance, production techniques, supplier choices, and many others.
These decisions almost always involve an element of uncertainty.
Prior to making decisions, companies often collect information through a series of steps called
the research process.
The steps include:
1. Defining the problem in specific terms that can be answered by research
2. Deciding on the type of data required
3. Determining through what means the data will be obtained
4. Planning for the collection of data and, if necessary, selection of a sample
5. Collecting and analyzing the data
6. Drawing conclusions and reporting the findings and

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 7. Following through with decisions that take the findings into consideration. Business and
survey research provide both descriptive and inferential statistics that can improve
business decisions in many kinds of situations.
1.5. Statistical Data
Statistical data are the basic input needed to make an effective decision in a particular situation.
The main reasons for collecting data are:
i) To provide necessary inputs to a given phenomenon or situation under study.
ii) To measure performance in an ongoing process such as production, service, and so on.
iii) To enhance the quality of decision – making by enumerating alternative courses of action
in a decision- making process, and selecting an appropriate one.
iv) To satisfy the desire to understand an unknown phenomenon.
v) To assist in guessing the causes and probable effects of certain characteristics in given
situations.
1.5.1. Types of Data
Statistical data are the outcome of a continuous process of measuring, counting, and/or
observing. These may pertain to several aspects of a phenomenon (or a problem) which are
measurable, quantifiable, countable or classifiable. The researcher will collect and analyze data
about the characteristics of the given population. These characteristics which one intends to
investigate and analyze are termed as variables. Variables have two natures: those which are
expressed in numerical terms and those which are not expressed in numerical terms. While sex,
religion, and language are a few examples of non-numerical variables, age, weight, height, and
distance are examples of numerical variables. The numerical variables are classified into two
categories:
A. Discrete variables – which can only take certain, fixed integer numerical values. For
example, the number of cards or the numbers of employees in an organization are examples
of discrete variables.
B. Continuous variables – This can take any numerical value. Measurements of height, weight,
length, in centimeters/ inches, grams/kilograms are a few examples of continuous variables.
Remark: Discrete data numerical measurements arise from a process of counting; while
continuous data are numerical measurements arise from a process of measuring.

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