Business Statistics

Tenth Edition
Ken Black

Chapter 1

Introduction to Statistics and Business

Analytics
Copyright ©2020 John Wiley & Sons, Inc.
Learning Objectives (1 of 2)
1. List quantitative and graphical examples of statistics
within a business context.
2. Define important statistical terms, including
population, sample, and parameter, as they relate to
descriptive and inferential statistics.
3. Explain the difference between variables,
measurement, and data.
4. Compare the four different levels of data: nominal,
ordinal, interval, and ratio.

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Learning Objectives (2 of 2)
5. Define important business analytics terms including
big data, business analytics, data mining, and data
visualization.
6. List the four dimensions of big data and explain the
differences between them.
7. Compare and contrast the three categories of business
analytics.

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1.1 Basic Statistical Concepts (1 of 9)

Statistics: a science dealing with the collection, analysis,

interpretation, and presentation of numerical data

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1.1 Basic Statistical Concepts (2 of 9)
Population versus Sample
• Population: all
o A collection of all persons, objects, or items under study
o Can be broadly or narrowly defined
• Census: gathering data from the whole population
• Sample: gathering data on a subset of the population
o Should be representative of the whole population
o Use information about the sample to infer about the population

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1.1 Basic Statistical Concepts (3 of 9)
Population

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1.1 Basic Statistical Concepts (4 of 9)
Population and Census Data
Identifier Color MPG
RD1 Red 12
RD2 Red 10
RD3 Red 13
RD4 Red 10
RD5 Red 13
BL1 Blue 27
BL2 Blue 24
GR1 Green 35
GR2 Green 35
GY1 Gray 15
GY2 Gray 18
GY3 Gray 17

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1.1 Basic Statistical Concepts (5 of 9)
Sample and Sample Data
Identifier Color MPG
RD2 Red 10
RD5 Red 13
GR1 Green 35
GY2 Gray 18

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1.1 Basic Statistical Concepts (6 of 9)
Two Branches of Statistics
• Descriptive
o Uses data gathered on a group to describe or reach
conclusions about that same group
o Produces graphical or numerical summaries of data

• Inferential
o Gathers data from a sample and uses the statistics
generated to reach conclusions about the population from
which the sample was taken
o Sometimes called inductive statistics
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1.1 Basic Statistical Concepts (7 of 9)
• Parameter: descriptive measure of the population
o Usually represented by Greek letters
µ denotes population mean
σ2 denotes population variance
σ denotes population standard deviation
• Statistic: descriptive measure of a sample
o Usually represented by Roman letters
x denotes sample mean
s2 denotes sample variance
s denotes sample standard deviation
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1.1 Basic Statistical Concepts (8 of 9)

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1.1 Basic Statistical Concepts (9 of 9)
• A variable is a characteristic of any entity being studied
that is capable of taking on different values
o E.g., stock price, age of worker, historical cost, market
share

• A measurement is the standard process used to assign

numbers to particular attributes of a variable
o Data are recorded measurements

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1.2 Data Measurement (1 of 6)
• Business analysts must know the level of data measurement of
the numbers being analyzed because all data cannot be analyzed
the same way

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1.2 Data Measurement (2 of 6)
Levels of Data Measurement
• Nominal: used only to classify or categorize
o No value statement is implied
o Lowest level of measurement
o Examples:
• Profession (doctor, lawyer…)
• Sex (male, female)
• Eye color (blue, brown, green…)
• Location (ZIP code)

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1.2 Data Measurement (3 of 6)
Levels of Data Measurement
• Ordinal: ranking or ordering
o Distances between ranks are not always equal
o Nominal and ordinal data are nonmetric data or
qualitative data because their measurements are
imprecise
o Examples:
• Ranking mutual funds by risk
• 50 most-admired companies

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1.2 Data Measurement (4 of 6)
Levels of Data Measurement
• Interval: numerical data in which the distances between
consecutive numbers have meaning
o Interval data have equal intervals
o Example: Fahrenheit temperature scale
• The zero point is a matter of convenience or convention
• A temperature of 0° does not mean that there is no
temperature
• The amounts of heat between consecutive readings are the
same
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1.2 Data Measurement (5 of 6)
Levels of Data Measurement
• Ratio: numerical data in which the distances between
consecutive numbers have meaning and the zero value
represents the absence of the characteristic being studied
o Highest level of data measurement
o Interval and ratio data are called metric or quantitative
data because their measurements are precise
o Examples:
• Volume
• Weight
• Kelvin temperature
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1.2 Data Measurement (6 of 6)
Usage potential among the four units of measurement
• Type of data determines the type of statistical analysis
that can be performed
o Nominal data is the most limited
o Ratio data is the broadest

• Parametric statistics require interval or ratio data

• Nonparametric statistics can be used with any data, but
nominal and ordinal data require nonparametric methods

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1.3 Intro to Business Analytics (1 of 9)
Big Data: a collection of large and complex datasets from
different sources that are difficult to process using
traditional data management and processing applications
• Variety: different forms and sources of data
• Velocity: the speed with which the data are available and
can be processed
• Veracity: data quality, correctness, and accuracy
• Volume: ever-increasing size of data and databases
• Value: sometimes considered a fifth characteristic

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1.3 Intro to Business Analytics (2 of 9)

Business Analytics: the application of processes and

techniques that transform raw data into meaningful
information to improve decision-making

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1.3 Intro to Business Analytics (3 of 9)
Categories of Business Analytics
• Descriptive Analytics: takes traditional data and
describes what has or is happening in a business
o Used to discover hidden relationships and patterns
o Simplest and most commonly used category
o Data visualization is key
o Also called reporting analytics
o Topics include descriptive statistics, frequency
distributions, statistical inference, correlation, clustering
techniques, data mining, and data visualization

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1.3 Intro to Business Analytics (4 of 9)
Categories of Business Analytics
• Predictive Analytics: finds relationships in the data that
are not readily apparent with descriptive analytics
o Patterns or relationships are extrapolated forward in time
and the past is used to make predictions about the future
o Topics include regression, time-series, forecasting,
simulation, data mining, statistical modeling, machine
learning techniques, decision tree models, and neural
networks

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1.3 Intro to Business Analytics (5 of 9)
Categories of Business Analytics
• Prescriptive Analytics: examines current trends and
likely forecasts to make better decisions
o Takes uncertainty into account, recommends ways to mitigate
risks, and tries to foresee the effects of future decisions
o Uses a set of mathematical techniques that determine optimal
decisions given a complex set of objectives, requirements, and
constraints
o Topics include management science or operations research
aimed at optimizing performance of a system such as
mathematical programming, simulation, and network analysis

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1.3 Intro to Business Analytics (6 of 9)
• Data Mining:
collecting, exploring,
and analyzing large
volumes of data to
uncover hidden patterns
to enhance decision-
making
• Used by companies to
turn raw data into useful
information

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1.3 Intro to Business Analytics (7 of 9)

Data Visualization: the study of the visual representation of

data and is employed to convey data or information by
imparting it as visual objects displayed in graphics

TABLE 1.1: Top Five Government Contractors to the U.S.

Treasury
Global Vendor Name Dollars Obligated
Coins 'N Things Inc. $529,070,983.45
Spectrum Group International Inc. $415,013,005.82
Sunshine Minting Inc. $406,300,921.45
Deloitte LLP $205,655,400.82
Crane & Co. Inc. $173,888,697.30

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1.3 Intro to Business Analytics (8 of 9)

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1.3 Intro to Business Analytics (9 of 9)

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Copyright
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