WELCOME

To all MBA
Students

from

Chanderpal Singh
{M.Com, MBA (Finance & Marketing}
 BUSINESS STATISTICS & ANALYTICS
KMB104

COURSE OBJECTIVES

1.Understand the different basic concept / fundamentals of business statistics.

2.Understand the practical application of various concepts.
3.Understand the importance of measures of Descriptive statistics which includes measures of central tendency, Measures of Dispersion, Time Series Analysis, Index
Number, Correlation and Regression analysis and their implication on Business performance.
4.Understand the concept of Probability and its usage in various business applications.
5.Understanding Decision making environment and applying the Concept of Business Analytics.

Course Credit: 4 Contact Hours: 40 hours

UNIT I (10 Sessions): Descriptive Statistics

Meaning, Scope, functions and limitations of statistics, Measures of Central tendency – Mean, Median, Mode, Quartiles, Measures of Dispersion – Range, Inter quartile
range, Mean deviation, Standard deviation, Variance, Coefficient of Variation, Skewness and Kurtosis.

UNIT II (8 Sessions): Time Series & Index Number

Time series analysis: Concept, Additive and Multiplicative models, Components of time series, Trend analysis: Least Square method - Linear and Non- Linear
equations, Applications in business decision-making.
Index Numbers:- Meaning , Types of index numbers, uses of index numbers, Construction of Price, Quantity and Volume indices:- Fixed base and Chain base methods.

UNIT III (6 Sessions): Correlation & Regression Analysis

Correlation Analysis: Rank Method & Karl Pearson's Coefficient of Correlation and Properties of Correlation.
Regression Analysis: Fitting of a Regression Line and Interpretation of Results, Properties of Regression Coefficients and Relationship between Regression and
Correlation.

UNIT IV ( 8 Sessions): Probability Theory& Distribution

Probability: Theory of Probability, Addition and Multiplication Law, Baye’s Theorem

Probability Theoretical Distributions: Concept and application of Binomial; Poisson and Normal distributions.

UNIT V (8 Sessions)Decision-making environments

Decision-making under certainty, uncertainty and risk situations; Decision tree approach and its applications.
Concept of Business Analytics- Meaning, types and application of Business Analytics.
COURSE OUTCOME :After the completion of the course the students will be able to:
Course Outcome Blooms Taxonomy
CO1. Gaining Knowledge of basic concept / fundamentals of business statistics. • Knowledge ( K 2)

CO2. To develop practical understanding of various statistics concepts. • Remembering ( K1)

• Applying ( K 4)
CO3. To compute various measures of central tendency, Measures of Dispersion, Time • Comprehending (K 3)
Series • Applying ( K 4)
Analysis, Index Number, Correlation and Regression analysis and their implication on
Business performance.
CO4. Evaluating basic concepts of probability and perform probability theoretical • Analyzing ( K 5)
distributions. • Synthesizing ( K6)
• Evaluating ( K7)
CO5. Taking managerial decision and applying the Concept of Business Analytics. • Applying ( K 4)

Text Book
1. G C Beri – Business Statistics, 3rd ed, TATA McGrawHill.
2. Manish Sharma & Amit Gupta, The Practice of Business Statistics, Khanna Publishing House, Delhi
3. Chandrasekaran&Umaparvathi-Statistics for Managers, 1st edition, PHI Learning

Reference Book
1. Davis,Pecar – Business Statistics using Excel, Oxford
2. Ken Black – Business Statistics, 5th ed., Wiley India
3. Levin and Rubin – statistics for Management, 7th ed., Pearson
4. Lind, Marchal, Wathen – Staistical techniques in business and economics, 13th ed, McGrawHill
5. Newbold, Carlson, Thorne – Statistics for Business and Economics, 6th ed., Pearson
6. J.K. Tyagi, Business Statistics, Khanna Publishing House, Delhi.
7. S. C.Gupta – Fundamentals of Statistics, Himalaya Publishing
8. Walpole – Probability and Statistics for Scientists and Engineers, 8th ed., Pearson
 Statistics
 The systematic and scientific treatment of
quantitative measurement is precisely
known as statistics.
 Statistics may be called as science of
counting.
 Statistics is concerned with the collection,
classification (or organization),
presentation and analysis of data which
are measurable in numerical terms.
Stages of Statistical
Investigation
Collection of Data

Organization of data

Presentation of data

Analysis

Interpretation of Results
 Statistics
 It is divided into two major parts:
Descriptive and Inferential Statistics.
 Descriptive statistics, is a set of methods
to describe data that we have collected. i.e.
summarization of data.
 Inferential statistics, is a set of methods
used to make a generalization, estimate,
prediction or decision. When we want to
draw conclusions about a distribution.
 Collection of Data
 Data can be collected by two ways:
>>> Primary Data Collection
It is the data collected by a particular person
or organization for his own use.
>>> Secondary Data Collection
It is the data collected by some other person
or organization, but the investigator also
get it for his use.
 Methods of Primary data
collection
 Direct personal interview
 Data through questionnaire
 Indirect investigation
Etc.
 Methods of Secondary data collection
 Data collected through newspapers &
periodicals.
 Data collected from research papers.
 Data collected from government
officials.
 Data collected from various NGO, UN,
UNESCO, WHO, ILO, UNICEF etc.
 Other published resources
 Classification of data
Classification is a process of arranging
data into sequences and groups
according to their common
characteristics or separating them
into different but related parts.
 It is a process of arranging data into
various homogeneous classes and
subclasses according to some
common characteristics.
 Presentation of Data
 Data should be presented in such a
manner, so that it may be easily
understood and grasped, and the
conclusion may be drawn promptly from
the data presented. e.g.
>>> Histogram
>>> Frequency polygon & curve
>>> Pie Chart
>>> Ogives
>>> Pictogram & Cartogram
>>> Bar Chart
 Variables
 Discrete Variable
e.g. No. of books, table, chairs
 Continuous Variable

e.g. Height, Weight

 Quantitative Variable

That can be measured on a scale

 Qualitative Variable

That can not be measured on a scale

 Frequency Distribution
The observations can be recorded by three
ways:
1. Individual Series
Data recorded for individual member.
2. Discrete Series
This variable can assume values after an
interval (or jumps).
3. Continuous Series
Here the variable may be having any value,
integer or fraction.
 Statistics functions & Uses
 It simplifies complex data
 It provides techniques for comparison
 It studies relationship
 It helps in formulating policies
 It helps in forecasting
 It is helpful for common man
 Statistical methods merges with speed of
computer can make wonders; SPSS, STATA
MATLAB, MINITAB etc.
 Scope of Statistics
 In Business Decision Making
 In Medical Sciences
 In Actuarial Science
 In Economic Planning
 In Agricultural Sciences
 In Banking & Insurance
 In Politics & Social Science
 Distrust & Misuse of Statistics
 Statistics is like a clay of which one
can make a God or Devil.
 Statistics are the liers of first order.
 Statistics can prove or disprove
anything.
 Measure of Central Tendency
It is a single value represent the entire
mass of data. Generally, these are
the central part of the distribution.
It facilitates comparison & decision-
making
There are mainly three type of measure
1. Arithmetic mean
2. Median
3. Mode
 Arithmetic Mean
This single representative value can be
determined by:
A.M. =Sum/No. of observations
Properties:
1. The sum of the deviations from AM is
always zero.
2. If every value of the variable increased or
decreased by a constant then new AM will
also change in same ratio.
 Arithmetic Mean (contd..)

3. If every value of the variable

multiplied or divide by a constant
then new AM will also change in same
ratio.
4. The sum of squares of deviations
from AM is minimum.
5. The combined AM of two or more
related group is defined as
Median
 The median is that value of the
variable which divides the group into
two equal parts, one part comprising
all values greater, and the other part
having lesser value than median.
 Determination of Median

>>> Arrange the data first

>>> Find the size of (N+1)/2 th item.
Mode
 Mode is that value which occurs most
often in the series.
 It is the value around which, the
items tends to be heavily
concentrated.
 It is important average when we talk
about “most common size of shoe or
shirt”.
 Relationship among Mean,
Median & Mode
 For a symmetric distribution:
Mode = Median = Mean
 The empirical relationship between
mean, median and mode for
asymmetric distribution is:
Mode = 3 Median – 2 Mean
 Skewness
Mode: Peak of the curve.
Median: Divide the curve into two equal
parts.
Mean: Center of gravity of the curve.
For a positively skewed distribution:
Mean>Median>Mode
 For a Negatively skewed distribution:

Mean<Median<Mode
 Dispersion or Variation
 The average does not enable us to
draw a full picture of the distribution.
So a further description is necessary
to get a better description.
 The extent or degree to which data
tends to spread around an average is
called dispersion & Variation.
 Objectives
 For judging the reliability of averages.
 Comparison of distributions
 Useful for controlling variability
 Useful in further analysis
 Measure of Dispersion
 Range
 Inter quartile Range
 Mean Deviation
 Standard Deviation
Range
 Range is the difference between the
largest and the smallest observation.
Range = L-S
 It is easy to calculate and provides a
full picture of variation of the data
quickly.
 It is crude measure & not based on all
the observations.
 Correlation Analysis
Correlation denotes the degree of
interdependence between variables
or the tendency of simultaneous
variation between variables.
Types of Correlation:
3. Positive & Negative

4. Linear & Non-linear

5. Multiple & Partial

 Positive & Negative Correlation
• Positive  Negative
• Income Vs  Price Vs
Expenditure Consumption
• Agricultural Prod  Day temp Vs Sale
Vs Rainfall of Woolen clothes
• Sales Vs Advt Expd

• Cost of raw
material Vs Cost of
Industrial Prod
 Measure of Correlation
 Scatter Diagram Method
 Karl Pearson’s Coefficient of
Correlation
 Spearman’s Coefficient of Rank
Correlation
 Concurrent Deviation Method
 Scatter Diagram Method
 It is a graphical method to find the
correlation between variables.
 Here the pair of the observations are
plotted on a 2-D space.
 After joining the these points we can
have the idea about the relationship
between variables.
 Karl-Pearson’s coefficient of
correlation (r)
 The value of r lying between -1 and
+1 i.e., -1≤r ≤+1
 Coefficient of correlation is
independent of change origin and
scale.
 Coefficient ‘r’ is symmetric rxy=ryx
 The Probable error of ‘r’ is used to
interpreting its estimated value.
 Spearman’s Coefficient of Rank
Correlation
 Karl-Pearson’s method discusses the
relationship between the quantitative
variable where as Spearman’s
coefficient suitable for qualitative
variable like, rank given to the
participant in any contest by two
judges and we want to measure the
relationship between rank given by
these judges.
 Concurrent Deviation Method
 This is the simplest method in which
only the direction of change is taken
into consideration rather than
magnitude of variation.
 It gives a general idea about the
correlation between variables quickly.
 Regression Analysis
 It is concerned with the formulation
and determination of algebraic
expression for the relationship
between variables.
 For this purpose we use regression
lines.
 These regression line are used for
predicting the value of one variable
from that of other.
 Regression Analysis contd..

 Here the variable whose value is to

be predicted is called dependent
(Explained) variable and the variable
used for prediction is called
independent (Explanatory) variable.
 This method first introduced by “Sir
Francis Galton”.
 It helps in prediction & estimation.
 Properties of Regression Lines &
Coefficient
 The regression line Y on X is used to
estimate the best value of Y (Dep.)
for a given value of X (Indep.).
 The regression line X on Y is used to
estimate the best value of X (Dep.)
for a given value of Y (Indep.).
 Both the regression coefficients are
independent of change of origin &
scale.
 Properties of Regression Lines
Coefficient & (contd..)

•  The
relation between r, byx and bxy is r
 = ±√ byx bxy
• Both the regression coefficient should have
 same sign.

• Both the regression coefficient could

Regression
 not coefficient
more than one denotes the
simultaneously.
rate of change. i.e. byx measure the
change in Y for a unit change in X.
Properties of Regression Lines
Coefficient & (contd..)

 Both lines cut each other at (X, Y).

 If r=0, both lines perpendicular to
each other.
 If the regression lines are identical,
the correlation between the variable
is perfect.
 Standard Error of Estimate
 It provides us a measure of scatter of
the observations about an average
line, the standard error of estimate of
Y on X is:
SY.X = √ [Σ(Y-Yest)2 / N]
 Probability
 Probability is a concept which
numerically measures the degree of
uncertainty or certainty of the
occurrence of any event. i.e. the
chance of occurrence of any event.
 The probability of an event A is
No. of Favorable cases
P(A)= Total No. of Cases
 Probability
 If P(A)=0, Impossible Event
 If P(A)=1, Sure Event
 0≤P(A)≤1
 P(A)= Probability of occurrence
 P(Ā)= Probability of Non-occurrence
 P(A) + P(Ā) = 1
 Some Keywords
 Equally Likely Events: When the chance of
occurrence of all the events are same in an
experiment.
 Mutually Exclusive Events: If the
occurrence of any one of them
prevents the occurrence of other in
the same experiment.
 Sample Space: the set of all possible
outcomes.
 Some Keywords
 Independent Events: If two or more
events occur in such a way that the
occurrence of one does not effect the
occurrence of other.
 Dependent Events: If the occurrence
of one event influences the
occurrence of the other.
 Classical or Priori Probability
 If a trial result in ‘n’ exhaustive,
mutually exclusive and equally likely
cases and ‘m’ of them are favorable
to the happenings of an event E, then
the probability ‘P’ of happening of E is
given by:
P(E) = m / n
 Empirical or Posteriori
Probability
•  The classical def requires that ‘n’ is finite and
that all cases are equally likely.
• This condition is very restrictive and
 can not cover all situations.

 The above conditions are not

necessarily active in this case.
 Fundamental rule of counting
 If an event can occur in ‘m’ ways and
following it, a second event can occur
in ‘n’ ways, then these two event in
succession can occur in ‘mxn’ ways.
 E.g. A tricolor can be formed out of 6
colors in 6x5x4=120 ways.
 No. of words of 3 characters out of 26
alphabets 26x25x24= 15600 ways.
 Permutations
 The different arrangement can be
made out of a given no. of things by
taking some or all at a time are called
permutations.
P (n,r) = n! / (n-r)!
 E.g. permutations made with letters
a,b,c by taking two at a time:
P(3,2)=6
ab, ba, ac, ca, bc, cb
 Combinations
 The combination of ‘n’ different
objects taken ‘r’ at a time is a
selection of ‘r’ out of ‘n’ objects with
no attention given to order of
arrangement
C (n,r) = n!/r!(n-r)!
e.g. From 5 boys & 6 girls a group of 3
is to be formed having 2 boys & 1 girl
is C(5,2) x C(6,1) = 60 ways
 Example
 A coin is tossed three times. Find the
probability of getting:
ii) Exactly one head
iii) Exactly two head
iv) One or two head
 Example
 One card is randomly drawn from a
pack of 52 cards. Find the probability
that
ii) Drawn card is red
iii) Drawn card is an ace
iv) Drawn card is red and king
v) Drawn card is red or king
 Example
 A bag contains 3 red, 6 white and 7
blue balls. Two balls are drawn at
random. Find the probability that
ii) Both the balls are white.
iii) Both the balls are blue.
iv) One ball is red & other is white.
v) One ball is white & other is blue.
 Addition Theorem
 For any two event A and B the
probability for the occurrence of A or
B is given by:
P(AUB)= P(A) + P(B) – P(AПB)
If A & B are mutually Exclusive then
P(AПB)=0
P(AUB)= P(A) + P(B)
 Multiplication or Conditional
Probability
 The probability of an event B when it
is known that the event A has
occurred already:
P(B/A)= P(AПB) / P(A) ;if P(A)>0
ie. P(AПB)= P(A).P(B/A)
 If A and B are Independent event:

P(AПB)= P(A).P(B)
 Example
 A bag contains 25 balls numbered from 1
to 25. Two balls are drawn at random from
the bag with replacement. Find the
probability of selecting:
ii) Both odd numbers.
iii) One odd & one even.
iv) At least one odd.
v) No odd numbers.
vi) Both even numbers.
 Example
 Five men in a company of 20 are
graduate. If 3 men are picked up at
random, what is the probability that
they are all graduate? What is the
probability that at least one is
graduate.
 Example
 The probability that A hits a target is
1/3 and the probability that B hits the
target is 2/5. What is the probability
that the target will be hit, if each one
of A and B shoots at the target.
 Expected Value of Probability
 Let X be the random variable with the
following distribution:
X : x1 x2 x3………..
P(X) :P(x1) P(x2) P(x3)……..
Expected Value is given by:
E(X) = Σ xi . P (xi)
 Example
 A player tossed two coins. If two
heads show he wins Rs. 4. if one
head shows he wins Rs. 2, but if two
tails show he pays Rs. 3 as penalty.
Calculate the expected value of the
game to him.
 Solution:
E(X)= (-3) ¼ + (2) ½ + (4) ¼ =1.25
 Example
 An insurance company sells a
particular life insurance policy with a
face value of Rs. 1000 and a yearly
premium of Rs. 20. If 0.2% of the
policy holder can be expected to die
in the course of a year, what would
be the company’s expected earning
per policy holder per year.
 E(X)= (-980) 0.002 + (20) 0.998=18