Business Statistics – Meaning and Importance
Business Statistics refers to the application of statistical tools and techniques to business and managerial problems for the purpose of decision making.
What is Statistics ?
Statistics is simply the study of numerical data, facts, figures and measurements. Statistics is used to convert raw numerical data into useful information for relevant users.
According to Bowley, “Statistics is a science of Averages”.
He defined statistics as “Numerical statement of facts in any department of enquiry placed in relation to each other”
Most of the information around us is determined with help of statistics –
- Weather Forecasts
- Medical Studies
- Quality Testing
- Stock Markets
- Predicting Emergencies
Business Statistics involves the application of statistical tools in the area of marketing, production, finance, research and development, manpower planning etc. to extract relevant information for the purpose of decision making.
Business managers use statistical tools and techniques to explore almost all areas or business operations of public and private enterprises. On the basis of the statistical technique used, statistics may be broadly divided into two categories:
- Descriptive Statistics – Descriptive statistics makes use of Graphs, tables, charts and other statistical tools to make generalizations or to describe a certain phenomenon.
- Inferential Statistics – All generalization made through descriptive statistics may not necessarily be true and therefore Inferential statistics is used to test the validity of the generalizations made. It involves estimating and validating facts and figures for the purpose of decision making.
Importance of Statistics
In Business – It helps to make swift decisions by providing useful information about customer trends and variations, cost customer trends and variations, price customer trends and variations etc.
In Mathematics – It helps in describing measurements and providing accuracy of theories.
In Economics – It helps to find relationship between two variables like demand and supply, cost and revenue, imports and exports and helps to establish relationship between inflation rate, per capita income, income distribution etc.
In Accounts – It helps to discover trends and create projections for next year.
In Physics – It helps to compute distance between objects in space.
Research – It helps in formulating and testing hypothesis.
Government – Government takes help of statistics to make budgets, set minimum wages, estimate cost of living etc.
Importance of Business Statistics
Business Statistics helps a business to:
- Deal with uncertainties by forecasting seasonal, cyclic and general economic fluctuations
- Helps in Sound Decision making by providing accurate estimates about costs, demand, prices, sales etc.
- Helps in business planning on the basis of sound predictions and assumptions
- Helps in measuring variations in performance of products, employees, business units etc.
- It allows comparison of two or more products, business units, sales teams etc.
- Helps in identifying relationship between various variables and their effect on each other like effect of advertisement on sales
- Helps in validating generalizations and theoretical concepts formulated by managers
Also Check Out: Statistics Handbook