# BUSINESS STATISTICS NOTES BCOM 1ST YEAR

## BUSINESS STATISTICS NOTES BCOM 1ST YEAR

### QUESTION: Discuss the functions, scope of Statistics. Also point out its limitations.

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.

ACCORDING TO ROBERT W BURGESS

“The fundamental gospel of statistics is to push back the domain of ignorance, prejudice, rule of thumb, arbitrary or premature decisions, traditions and dogmatism and to increase the domain in which decisions are made and principles are formulated on the basis of analyzed quantitative facts.”

Thus, the following are functions of statistics:

#### PRESENTATION OF FACTS IN DEFINITE FORM

One of the functions of statistics is presentation of facts in definite form. Statistics helps in presenting the complex facts in definite form to the users.

Statistics makes use of various analysis techniques to present the collected data in the useful and definite form.

EXAMPLE: Suppose the statement is ‘Population of India is increasing day by day’, this statement is not statistics and does not convey any definite meaning. However with the help of the statistics collected we can say that ‘Population of India has increased from 102 crore in 2001 to 121 crore in 2011’. This statement is conveying the definite meaning about the rise of population.

#### STATISTICS PRESENT THE COMPLEX DATA IN EASY FORM

Statistics is also associated with the organisation and classification of the data. This is done to remove all the inconsistencies, irregularities out of the data and to give a clear view of the whole data.

ACCORDING TO A E WAUGH

“The purpose of statistical methods is to simplify great bodies of numerical data.”

The presentation of the data in the forms of graphs, charts, tables, diagrams, pie charts and bar graphs etc. make the data available in easy and understandable form.

EXAMPLE: It is impossible to present data about the income of every person of India but with the help of Statistics, incomes of all persons can be presented as ‘PER CAPITA INCOME.’

One of the functions of statistics is presentation f facts in definite form making the comparisons. The simplified data is compared with another set of data to give meaningful results.

ACCORDING TO BODDINGTON

“The object of statistics is to enable comparison to be made between past and present results with a view to ascertaining the reasons for changes which have been taken place and the effect of such changes in the future.”

Statistics facilitates inter-temporal, international comparisons as well as many other  comparisons.

EXAMPLE: The growth and progress rate of Indian Economy from the date of independence to present times is an example of Inter-temporal comparison.

The rate of unemployment in Indian economy as compared to USA economy is a kind of international comparison.

#### HELPFUL IN ANALYSIS OF DATA

Statistics is helpful in the analysis of numerical data. The data collected is analysed with the use of techniques like

• Measure Of Central Tendency
• Measures Of Dispersion
• Kurtosis
• Interpolation And Extrapolation
• Probability Theory

#### FORMULATION AND TESTING OF HYPOTHESIS

Statistics is highly useful in the formulation and testing of the hypothesis. A researcher may formulate the hypothesis on the basis of the observation. The hypothesis is tested with the help of statistics and if the hypothesis is selected, a new theory comes into the existence.

EXAMPLE: The application of the Law of Demand may be verified with the help of the statistics.

#### HELPS IN POLICY FORMULATION

All the policies to be made or modified require some kind of data which is collected with the help of statistics. So, statistics helps in policy formulation. Statistics made available all the data which is required to study the intensity of the issue and policy can be formulated after taking into consideration all the relevant facts.

EXAMPLE: To frame the Poverty Alleviation policy, the statistics make the data available about the number of persons that live below poverty line, the amount of income earned by the residents, etc.

With the use of statistics in the field of industry, commerce, trade, agriculture, business and economy, policies are framed.

#### HELPFUL IN FORECASTING AND PREDICTION

Forecasting and Prediction is an important part of Statistics. All statistical techniques are helpful in prediction of future trends. The data collected helps in predicting about the behavior of the variables in the future.

EXAMPLE: The sale of the product can be predicted or forecasted on the basis of the statistical data collected on the market demand of the product.

The statistical techniques like Time Series Analysis, Extrapolation and Regression Analysis provide a scientific base for making predictions.

#### TO ENLARGE HUMAN KNOWLEDGE AND EXPEREINCE

Statistics helps in increasing the knowledge and experience of the human. The uses of the statistical techniques helps in gaining the knowledge about the new concepts and improve the power of reasoning in human beings.

ACCORDING TO PROF. AL BOWLEY

“The proper function of statistics, indeed, is to enlarge individual experience.”

#### HELPS IN MEASURING AFTER EFFECTS

Statistics are also helpful in measuring the after effects of the policies implemented. The policies can be reframed after considering the effects by analyzing and studying the previous subjects.

#### HELPFUL IN REALISING MAGNITUDE OF THE PROBLEM

Statistics is helpful in realizing the intensity or magnitude of the problem. It tells about the degree or severeness of the issue.

EXAMPLE: ‘Population has increased in India’ does not tell about the magnitude of the problem of population explosion. But the fact that population has increased to 121 crore truly conveys the intensity of the issue of population increase.

## SCOPE OF STATISTICS

It is often said that “Statisticians is what Statisticians do”. This explains the scope of statistics as very wide and extends extensively to the fields of Economics, Commerce, Trade, Industry, Agriculture Physical sciences, bio-sciences, astronomy, psychology and many more.

The following points explain the scope of the statistics:

#### STATISTICS AND THE STATE

The word Statistics has been derived from the various words:

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

All these words means ‘political state’ or ‘stateman’s art’. This means statistics has a deep relation with the state. In ancient times the statistics is considered as Science of kings or science of statecraft and is associated with:

• Collection of data concerning population
• Number of deaths and births
• Area under land cultivation
• Number of crimes
• Military strength and allied tasks.

But at present times, statistics is used by almost all ministries or government departments like Finance Ministry, Agriculture Ministry, Defence Ministry, Industrial Ministry and many more.

EXAMPLE: Use of statistics for framing the policy of poverty alleviation, population control, inflation control, money supply etc.

#### STATISTICS AND ECONOMICS

Scope of Statistics include the area of Economics also. The statistical data and methods of statistics are used for understanding the

• Economic theories
• Economic problems
• Economic policy formulation
• Economic planning
• Budgeting
• National income accounting

Statistics is helpful in understanding the intensity of the economic problem and deriving the solutions for the same on the basis of the data available.

EXAMPLE

• Index Numbers are used to study Price of commodities, Volume of production, imports and exports etc.
• Time series analysis is used to study the behavior of prices, production and consumption of commodities, money in circulation and sales of the firms.

#### STATISTICS AND ECONOMETRICS

Econometrics is one of the most recent fields of study concerning economics. It combines the methods and techniques of Statistics and Mathematics to build models for the analysis of economic problems and then provides solution to all those problems.

EXAMPLE: In Econometrics Linear Regression models are formulated to analyze the effect of various determinants of demand on demand for a product.

#### STATISTICS AND NATURAL SCEINCES

Natural sciences are biology, Zoology, medicine, meteorology etc. the statistics are helpful in the field of physical sciences as the experiments conducted in this field are based upon the data collected with the help of descriptive statistics. Statistics is used both for analyzing data and drawing conclusions.

#### STATISTICS AND PHYSICAL SCEINCES

Physical sciences involve Geography, geology, astronomy, Physics etc. Descriptive statistics is used to present the complex phenomenon concerning these branches of study in numerical form in a very simple way. The methods of statistics are applies to analyze the data and to find conclusions.

EXAMPLE: In geography data concerning temperature level over the years can be collected and analyzed with the help of the statistics.

#### STATISTICS AND SOCIAL SCEINCES

The statistical methods are also useful in the field of History, Sociology, Education, Psychology etc. Various researches in this field are done with the help of statistics.

EXAMPLE: In the field of politics, Statistics is used to evaluate the effects of the policies of the government.

In History, the record of all the past events is maintained with the help of the descriptive statistics.

#### STATISTICS AND RESEARCH

The Scope of statistics also includes the area of research. Any kind of research work is incomplete without the use of Statistics. It plays an important role in the empirical investigation of the laws and theories of various branches of study. It helps in verifying the practical validity of the laws and theories of various branches of study.

#### STATISTICS AND PLANNING

The scope of statistics also expands to the area of Planning. Planning is always done on the basis of past records or data. In this way, statistics becomes a base for planning and forecasting about the future.

ACCORDING TO TIPPET

“Planning is the order of the day and without statistics, planning is inconceivable”.

The saying of the Tippet rightly marked that the statistics and planning are indispensable.

#### STATISTICS AND INDUSTRIAL MANAGEMENT

The scope of statistics also extends to the field of Industry. Statistical Quality Control is a branch of Statistics that deals with ‘Quality Control’ of manufactured goods. With the help of probability theory and sampling technique, control charts and inspection plans are formulated.

EXAMPLE: ISO (International Standard Organisation) has stipulated certain statistical procedures to be followed to get an ISO series certificates which have increased the scope of statistics.

#### STATISTICS AND BANKING

Statistics is used in the field of banking for various activities like

• Fixing rate of interests
• Making recoveries
• Establishment of new branches etc.

Also the credit policy is framed on the basis of the data collected regarding the demand and supply of money in the economy.

#### STATISTICS AND INSURANCE

Theory of probability is the tool of statistics that is used in the insurance sector for the calculation of premium rates. Also life expectancy tables are prepared with the help of the statistics.

#### STATISTICS AND COMMERCE

Statistics is also helpful in each and every activity that is covered under the framework of the commerce. It is used in the business activities such as:

• Production Management
• Demand forecasting
• Financial Analysis
• Costing
• Marketing
• Manpower Planning
• Market Research etc.

## LIMITATIONS OF STATISTICS

Undoubtedly, statistics has universal applicability, but there are also some facts which prove as limitations of statistics.

ACCORDING TO NEWSHOLME

“Statistics must be regarded as an instrument of research of great value but having severe limitations which are not possible to overcome and as such need our careful attention.”

The limitations of statistics are as follows:

#### QUALITATIVE ASPECTS IGNORED

Statistics consider only those facts that can be expensed quantitatively. It means statistics do not record qualitative aspects of the data. The important variables like honesty, integrity, loyalty etc. cannot be studied under the scope of the statistics.  To study the qualitative data, first it must be converted into the quantitative form, and then the technique of statistical analysis can be applied on it.

ACCORDING TO HORACE SACRIST

“Some phenomenon cannot be quantitatively measured, honesty of resourcefulness, integrity, goodwill, all important in industry as well as in life generally, are not susceptible of direct statistical measurement.”

#### STATISTICS DEALS WITH AGGREGATES ONLY

The results of the statistics are not applicable on the individuals. This is so because statistics cannot deal with the single, isolated and ungrouped data. It deals with set of observations only.

EXAMPLE: The finding of per capita income of Punjab does not mean every person residing there has same income. Some people may have more and other may have less. This shows that statistics do not deal with individuals and its results are applicable on group only.

#### STATISTICS DEALS WITH AVERAGES ONLY

ACCORDING TO WI KING

“Statistics largely deals with averages and these averages may be made up of individuals items radically different from each other.”

The above statement truly reflects that statistics deals with averages only. In fact, statistics is not a pure science as like other physical sciences. The reason being the phenomenon taken under the study is affected by multiplicity of causes. And it is impossible to study the effect of each factor individually.

#### STATISTICS CAN BE MISUSED

Statistics can be easily misused if the wrong person is using it. There is lots of personal judgment or biasness involved in it while:

• Selecting the analysis technique
• Selecting the sample
• Deriving the results.

A statistician or researcher can misuse the data collected

• If he has no proper knowledge to use it
• If he is inexperienced
• By applying biased analysis techniques
• By choosing favorable items in the sample.

#### STATISTICS DOES NOT REVEAL THE ENTIRE STORY

Statistics do not provide solutions to the all kinds of the problems in all circumstances. There are so many problems which are affected by many factors like culture, religion, history, philosophy, character etc. Statistics are not of so much help to study all such problems.

#### STATISTICS CAN BE USED BY EXPERTS ONLY

The techniques of the statistics are not easy to use. These can be used by experts only who are having sufficient knowledge of applying the techniques. Also the researcher must possess the experience of collecting the data from the adequate or correct sources.

#### STATISTICS RESULTS ARE NOT ALWAYS DEPENDABLE

Statistics is the science of averages. All the results are found out with the help of the probabilistic analysis techniques. The findings are not purely correct. The outcomes are also not applicable in all the situations. This proves as one of the serious limitations of statistics.

#### ACCORDING TO CONNOR

“Statistics deals only with measurable aspects of things and therefore can seldom give the complete solution to a problem. They provide a basis for judgement but not the whole judgment.”

#### ONLY A MEAN NOT AN END

ACCORDING TO CROXTON AND COWDEN

“It must be assumed that the statistical method is the only method for the use in research; neither should this method be considered the best attack for every problem.”

The tools of statistics are supposed to be only a means to understand any given problem rather than a method to solve any problem.

### CONCLUSION

The limitations of statistics are numerous but it is still a useful and helpful science to study various problems. Only thing is that it must be used by experts with proper care and caution.