# BUSINESS STATISTICS NOTES BCOM 1ST YEAR

## BUSINESS STATISTICS NOTES BCOM 1ST YEAR

### QUESTION: Define Statistics and discuss its utility as a managerial tool. Also discuss the ‘distrust’ of Statistics?

Statistics are numerical statement of facts capable of analysis and interpretation as well as study of the methods used in collection, organization, presentation, analysis and interpretation of numerical data.

Statistics word has been derived from

• Latin word ‘Status
• Italian word ‘Statista
• German word ‘Statistik
• French word ‘Statistique’.

#### STATISTICS IN PLURAL SENSE

It refers to group of numerical data collected in a systematic manner with some definite objective.

ACCORDING TO HORACE SACRIST

“Statistics is the aggregate of facts, affected to a marked extent by multiplicity of causes, numerically expressed, enumerated or estimated according to a reasonable standard of accuracy, collected in a systematic manner, for a predetermined purpose and placed in relation to each other”.

#### STATISTICS IN SINGULAR SENSE

In singular sense, statistics refers to a science of all those statistical methods and techniques which are related with various stages of statistical analysis.

ACCORDING TO CROXTON AND COWDEN

“Statistics may be defined as the science of collection, presentation, analysis, interpretation of numerical data.”

## UTILITY OF STATISTICS AS A MANAGERIAL TOOL

A good businessman makes a good sales prediction keeping in view all types of seasonal and market variations. The big industrial units test the quality of raw materials they purchase and the finished goods they sell by methods of sampling. The businessmen can also study the additional requirements which propels people to like their products. The businessmen give sale-incentives for their agencies in the form of higher commissions, price-cuts etc. It is possible only if relevant data are available. Thus in modern business, it is due to availability of data, that suitable policies can be followed in case of production, investment, marketing and sale management.

Following are of the typical application areas:

Use for Quality Management (SQC): Statistical quality control (SQC) helps in separating the assignable causes from the chance causes. SQC techniques also help in reducing and stabilizing process variation that may reduce cost significantly.

Use in Process Capability: It enables us to find out whether the enterprise is capable of meeting customer specification. If it is not meeting customer requirements, then management has to take decisions regarding the modernization of plant, change the technology etc. to achieve process capability. Statistics plays a crucial role in this field.

Use in Finance area

(a) Financial ratio analysis: Key financial ratios are worked out, by using the Balance sheet and income statement data, to know the financial health of an enterprise, comparative statistical analysis reveals the performance of the company in the past years and the emerging trend in the future.

(b) Cash forecasting: Financial analyst has to forecast cash requirement to meet short-term obligations eg payment of salary, working capital, payments to suppliers etc. Statistical analysis helps in working out realistic cash forecasting.

Use in Materials Management

(a) Inventory level: By using appropriate statistical methods one can maintain in optimum inventory level of raw materials and finished products and thus savings are made which impact the profit.

(b) Quality assessment for incoming and outgoing items: Statistical sampling techniques help in ensuring quality of incoming and outgoing items. Raw materials and the other items are checked for quality to meet customer’s needs and inspection of finished products is done on sample basis to reduce complaints from customers.

Use in Marketing

(a) Marketing research: It provides solutions to various problems involved in marketing goods, services or ideas. In this context systematic collection, analysis and interpretation of marketing data is done by using statistical methods. Marketing decisions involve the introduction of new product, reaction of consumer to price hike, effectiveness of advertisement comparison etc.

(b) Demand projections: Short-term and long term demand projections are required for the company’s products and services. These projections are required both for domestic and international markets. Statistical surveys and analysis of the past time series data relating to industry provides reliable sales and demand projections.

## DISTRUST OF STATISTICS

Distrust of statistics means lack of confidence in the statistical methods and statements. As statistics suffers from various limitations, that is the reason statistics become a thing of distrust.

ACCORDING TO YULE AND KENDALL

“Statistical methods are most dangerous tools in the hands of an inexpert.”

The following are the points that give rise to the distrust of statistics:

#### FIGURES MAY BE INCOMPLETE, INACCURATE AND DELIBERATELY MANIPULATED

The facts and figures to be studied under the statistics are collected by the human beings. This is their bent of mind that which kind of data they collect. If the data is faulty, then statistical findings may not be reliable.

ACCORDING TO PROF. KING

“One of the shortcomings of statistics is that they do not always bear on their face, the label of quality.”

So it is not the statistics which proves itself unreliable, it is the mishandling of the statistical affairs by the investigator.

#### STATISTICS CAN PROVE WHATEVER IT WANTS

Statistics can prove whatever it wants is a baseless notion. Statistics do not explain the relationships between the items rather this depends upon the investigator which kind of comparison he is going to do.

ACCORDING TO PROF. KING

“Statistics are like clay out of which you can make God or Devil as you please.”

If the investigator studies the relationship between height of giraffe and height of human being, then the result will be useless or baseless. If investigator studies the relationship between demand and price of a commodity, the result will be fruitful.

So it is not the science of statistics which is faulty, it is the interpretation and study topic of the investigator which give wrong conclusions.

#### STATISTICS ARE THE TISSUES OF FALSE HOOD

Some of the statements regarding the statistics made by various statistician are:

• There are three degrees of lies- lies, damn lies and statistics.
• There are black lies, white lies, multi-chromatic lies, statistics is a rainbow of lies.
• History asserts without evidence while statistics asserts contrary to the evidence.
• Statistics are like a bathing costume which reveals all that is interesting and conceals all that is vital.

These statements point towards the fact that statistics are tissues of false hood. But this notion is wrong, it is only the inexperience of the researchers who gives false conclusions which comes in front as distrust of statistics.

#### CONCLUSION

Distrust of statistics has arisen only because of the inefficiency of the researchers to apply the statistical techniques and tools in right way. According to AM MOOD, “It is the statistics which provides tools and techniques for research workers.” Thus, despite of its serious limitations and arguments against it, the usefulness or relevance of statistics can never be ignored. It is the ‘Science of Kings’ in real sense.