Statistics may be defined as the collection, presentation, analysis and interpretation of numerical data.

Croxton & Cowden.

Features of Statistics
Statistics are aggregates of facts
Statistics are affected to a marked extent by a multiplicity of causes
Statistics are numerically expressed
Statistics are enumerated or estimated according to reasonable standards of accuracy
Statistics are collected in a systematic manner
Statistics are collected for a predetermined manner
Statistics should be placed in relation to each other
Statistics are both science and art
Functions of Statistics
Statistics presents facts in a definite form
Statistics simplifies mass of figures
Statistics facilitates comparison
Statistics helps in formulation and testing hypothesis
Statistics helps in prediction
Statistics helps in formulation of suitable policies
Limitations of Statistics
Statistics do not deal with individual measurements
Statistics deals only with quantitative characteristics
Statistics results are true only on an average
Statistics is only one of the methods of studying a problem
Statistics can be misused
Scope of Statistics in Business
Statistical analysis allows businesses to deal with the uncertainties of the business. It allows managers to
make sound judgments by formulating different plans and policies using statistics. It helps him in
forecasting the future trends and tendencies. To estimate the market fluctuations, changes in the demand
conditions etc. statistical techniques are often used. Hence for becoming a successful businessman, ideas in
statistics are essential. Especially with Specialisation and globalization of business, statistics find use in:
1. Marketing: Statistical analysis are frequently used in providing information for making decision in the
field of marketing it is necessary first to find out what can be sold and the to evolve suitable strategy, so that
the goods which to the ultimate consumer. A skill full analysis of data on production purchasing power, man
power, habits of compotators, habits of consumer, transportation cost should be consider to take any attempt
to establish a new market.
2. Production: In the field of production statistical data and method play a very important role. The decision
about what to produce? How to produce? When to produce? For whom to produce is based largely on
statistical analysis.
3. Finance: The financial organization discharging their finance function effectively depend very heavily on
statistical analysis of peat and tigers.
3. Banking: Banks have found if increasingly to establish research department within their organization for
the purpose of gathering and analysis information, not only regarding their own business but also regarding
general economic situation and every segment of business in which they may have interest.
4. Investment: Statistics greatly assists investors in making clear and valued judgment in his investment
decision in selecting securities which are safe and have the best prospects of yielding a good income.
5. Purchase: the purchase department in discharging their function makes use of statistical data to frame
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suitable purchase policies such as what to buy? What quantity to buy? What time to buy? Where to buy?
Whom to buy?
6. Accounting: statistical data are also employer in accounting particularly in auditing function, the
technique of sampling and destination is frequently used.
7. Control: the management control process combines statistical and accounting method in making the
overall budget for the coming year including sales, materials, labor and other costs and net profits and
capital requirement.
7. Insurance: Statistics is of great use in insurance sector in calculation of premium and risks.
Stages in Statistics
1.
Collection of data: The collection of data is the first step of statistical investigation. It must be
collected very carefully. So, the data must be covered, if not the conclusion will not be reliable.
2.
Organization: The data may be obtained either from primary source or the secondary source. If the
data is to be obtained from the primary source, then it needs organization. The data are organized by
editing, classifying and tabulating them.
3.
Presentation: After the collection and organization of data, they are presented in systematic form
such as table, diagram and graphical form.
4.
Analysis: After the collection, organization and presentation of data, the next step is to analyze the
data. To analyze the data we use average, correction, regression, time series etc. The statistical tools of
analysis depend upon the nature of data.
5.
Interpretation: The last step of a statistical method is the interpretation of the result obtained from
the analysis. Interpretation means to draw the valid conclusion.
An Experiment is a process of collecting data about population characteristics when control is exercised
over some or all of the factors that may affect the characteristics of interest in study.
A Survey is a process of collecting data from existing population units with no particular control over
factors that may affect the population characteristics of interest in the study.
Stages in a Statistical Survey
A. Planning the survey
(i) Specification of the purpose of the survey or the statement of the problem
(ii) Determining the scope of survey
(iii) Deciding on the unit of Data collection
(iv) Selecting the source of data (Primary, Secondary or both)
(v) Deciding on the technique of data collection (Sample, or Census and, if Sample, the method of
sampling)
(vi) Choice of a frame, or construction of frame, if none is available.
(vii) Degree of accuracy desired
(viii) Miscellaneous considerations such as nature, structure and confidentiality of the study.
B. Executing the survey
(i) Setting up an administrative organisation
(ii) Design of forms, including Questionnaire
(iii) Selection, Training and Supervision of Field investigators
(iv) Control over the quality of the field and the field edit
(v) Follow-up of Non-response
(vi) Processing of data
(vii) Preparation of Report
Layout of a Report
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A report can have many elements depending on the nature of the work being carried out, confidentiality,
sponsors, and formal/informal nature of the study but essentially has the following parts
Statement of the purpose of the survey
Description of the coverage
Collection of information including units, methods, techniques of data collection
Numerical results along with the tools of analysis
Accuracy attained
Miscellanous considerations like preliminary work done, Sponsor details, nature of study, references,
etc.,
Census: In census method every element of the population is included in the investigation.
Mertis:
1. The data are collected from each and every item of the population
2. The results are more accurate and reliable, because every item of the universe is required.
3. Intensive study is possible.
4. The data collected may be used for various surveys, analyses etc.
Limitations:
1. It requires a large number of enumerators and it is a costly method
2. It requires more money, labour, time energy etc.
3. It is not possible in some circumstances where the universe is infinite
Sampling:
A finite subset of statistical individuals defined in a population is called a sample. The process or technique
of selecting a sample is called sampling. The number of units in a sample is called the sample size.
Reasons for selecting a sample:
1. Complete enumerations are practically impossible when the population is infinite.
2. When the results are required in a short time.
3. When the area of survey is wide.
4. When resources for survey are limited particularly in respect of money and trained persons.
5. When the item or unit is destroyed under investigation
Advantages of Sampling:
1. Sampling saves time and labour.
2. It results in reduction of cost in terms of money and man- hour.
3. Sampling ends up with greater accuracy of results.
4. It has greater scope.
5. It has greater adaptability.
6. If the population is too large, or hypothetical or destroyable sampling is the only method to be used.
limitations of sampling
1. Sampling is to be done by qualified and experienced persons. Otherwise, the information will be
unbelievable.
2. Sample method may give the extreme values sometimes instead of the mixed values.
3. There is the possibility of sampling errors. Census survey is free from sampling error
Sampling Techniques:
A. Non-Probability (Non-Randomised)Sampling techniques: These techniques do not offer each unit
of the population with equal chance of getting selected into sample. they are of three types:
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i)

Judgemental Sampling: When the investigator uses his judgement to determine as to which
unit will be included into sample, it is called judgemental sampling. It is dependent on the
experience, belief and attitudes of the investigator and his understanding of the population.
ii)
Convenience Sampling: When the investigator selects a unit to be represented into a sample
because of ease of collecting data from it, then it is called convenience sampling.
iii)
Quota Sampling: It is a modified form of judgemental sampling. Here specific quotas are
fixed for each group in a population representing any attribute and number of units are to be
selected from each of such quota
B. Probability (Randomised) sampling techniques: These techniques offer each unit of the
population with equal chance of getting selected into sample. they are of three types:
i)
Lottery Method: It is a simple or unrestricted technique. This is the most popular and
simplest method. In this method all the items of the population are numbered on separate
slips of paper of same size, shape and colour. They are folded and mixed up in a container.
The required numbers of slips are selected at random for the desire sample size
ii)
Table of Random numbers method: It is a simple or unrestricted technique. As the lottery
method cannot be used, when the population is infinite, the alternative method is that of using
the table of random numbers. There are several standard tables of random numbers. 1.
Tippett s table 2. Fisher and Yates table 3. Kendall and Smith s table are few of them.
iii)
Stratified sampling: It is a restricted technique. Stratification means division into groups.In
this method the population is divided into a number of subgroups or strata. The strata should
be so formed that each stratum is homogeneous as far as possible. Then from each stratum a
simple random sample may be selected and these are combined together to form the required
sample from the population.
iv)
Sequential sampling: It is a restricted technique. Here sample selection is based on just a
random start . The first unit is selected with the help of random numbers and the rest get
selected automatically according to some pre designed pattern is known as systematic
sampling. With systematic random sampling every Kth element in the frame is selected for
the sample, with the starting point among the first K elements determined at random.
v)
Cluster Sampling: It is a restricted technique, wherein selection occurs at multiple levels. At
each stage few units are selected and few ignored.
Primary data: Primary data is the one, which is collected by the investigator himself for the purpose of a
specific inquiry or study. Such data is original in character and is generated by survey conducted by
individuals or research institution or any organisation.
Advantages of Primary data
Investigator has a greater control over the accuracy of data
It includes definitions of terms and units used
It includes often a copy of schedule and a description of the procedure used in selecting sample and
collecting data
It shows data in greater detail
The primary data can be collected by the following five methods.
1. Direct personal interviews.
2. Indirect Oral interviews.
3. Information from correspondents.
4. Mailed questionnaire method.
5. Schedules sent through enumerators

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Bar diagram is a one dimensional representation of data in form of bar, which is a thick line whose width is
shown merely for attention.
Pie Diagram is a circular, statistical graphic divided into slices to illustrate numerical proportion of related
data.
Histogram is a set of vertical bars whose areas are proportional to the frequencies of occurrence and the
class of the variabke being analysed.
Frequency Polygon is a graph of the frequency distribution effective I comparing two or more frequency
distributions
Average is an attempt to find one single figure to describe whole of figures..
Characteristics for a good or an ideal average :
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1. It should be rigidly defined.

2. It should be easy to understand and compute.
3. It should be based on all items in the data.
4. Its definition shall be in the form of a mathematical formula.
5. It should be capable of further algebraic treatment.
6. It should have sampling stability.
7. It should be capable of being used in further statistical computations or processing.
Arithmetic mean of a variable is defined as the sum of the observations divided by the number of
observations.
Median is a positional measure that identifies the middle value of a distribution.
Mode is the variable value that occurs most number of times (has greatest frequency).
Geometric Mean is defined a s Nth root of the product of N individual observations.
Harmonic Mean is defined as the reciprocal of the arithmetic mean of the reciprocal of the individual
observations
Dispersion is defined as the degree to which numerical data tends to spread about an average value.
Range is defined as the difference between the value of the smallest and largest observation
Quartile Deviation is defined as the one half of the middle 50 percent of the distribution.
Mean Deviation is defined as the average difference between individual observations and its mean or
median.
Standard Deviation is defined as the square root of the mean of the squared deviations of individual
observations from their mean.
Variance is the square of the standard deviation
Skewness refers to the asymmetry or lack of symmetry in the shape of a frequency distribution.
If value of mean is more than that of mode and median lies in between, it is a positively skewed distribution
If value of mode is maximum than that of mean and median lies in between, it is negatively skewed.
Kurtosis is the degree of peakedness of a distribution, in relative to normal distribution.
A Leptokurtic curve has a taller peak and a smaller area in its tails
A Mesokurtic curve is a normal distribution curve
A Platykurtic curve has a shorter peak and larger area at its tails.
Probability: Laplace defines, Probability as the number of favourable cases to the total number of equally
likely cases.
Experiment refers to describe an act which can be repeated under some given conditions.
Random experiments are those whose results depend on chance and are free from bias.
Event refers to the outcome or result of an experiment.
Events are said to be Equally Likely events when one does not occur more often than the other.
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Events are said to be Exhaustive events when their totality includes all possible outcomes of the random
experiment.
A Certain event is one whose occurrence is inevitable (guarnateed). It has a probability of 1.
An Uncertain event is one which can never occur. It has a probability of 0.
Two or more events are said to be Mutually Exclusive (or incompatible) events if occurrence of one
event precludes the occurrence of other. In other words both the events cannot happen simultaneously.
Two or more events are said to be Independent events when occurrence of one events does not affect
and is not affected by the occurrence of other event.
Two or more events are Dependent events if occurrence or non-occurrence of one event in a trial affects
the outcome probability of the other in other trials.
Simple event is one where only probability of occurrence or non-occurrence of a single event is
considered.
Compound events is when we consider probability of occurrence or non-occurrence of two or more
events.
If two events are mutually exclusive and exhaustive then they are called as Complementary events.

Permutation refers to each of several possible ways in which a set or number of things can be ordered or
arranged.
A Combination is a way of selecting several things out of a larger group, where order does not matter.
Operations Research (OR): Operations Research is a scientific approach to decision making, which seeks
to determine how best to design and operate a system, under conditions requiring the allocation of scarce
resources.
Objective of Operations Research: The objective of the operations research models is to attempt and to
locate best or optimal solution under the specified conditions.
Characteristics of Operations Research: Following are the significant features of operations research:
1. It is a decision making tool, aimed at obtaining optimal solution to various problems.
2. It applies scientific methods, tools and techniques for the purpose of analysis and solution.
3. It is a inter-disciplinary field that requires efforts of a team.
4. It studies the interrelationship and interaction of each sub-system.
Scope of Operations Research: Operations Research finds its utility in many fields.
(i) Defence services: Basically formulation of OR started from its use in army, so it has wide application in
the areas such as: development of new technology, optimization of cost and time, tender evaluation, setting
and layouts of defence projects, assessment of Threat analysis, strategy of battle, effective maintenance
and replacement of equipment, inventory control, transportation and supply depots etc.
(ii) National Planning and Budgeting: OR is used for the preparation of Five Year Plans, annual budgets,
forecasting of income and expenditure, scheduling of major projects of national importance, estimation of
GNP, GDP, population, employment and generation of agriculture yields etc.
(iii) Industrial Establishment and Private Sector Units: OR can be effectively used in plant location and
setting finance planning, product and process planning, facility planning and construction, production
planning and control, purchasing, maintenance management and personnel management etc. to name a few.
(iv) R & D and Engineering: Research and development being the heart of technological growth, OR has
wide scope for and can be applied in technology forecasting and evaluation, technology and project
management, preparation of tender and negotiation, value engineering, work/method study and so on.
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(v) Business Management and Competition: OR can help in taking business decisions under risk and
uncertainty, capital investment and returns, business strategy formation, optimum advertisement outlay,
optimum sales force and their distribution, market survey and analysis and market research techniques etc.
(vi) Agriculture and Irrigation: In the area of agriculture and irrigation also OR can be useful for project
management, construction of major dams at minimum cost, optimum allocation of supply and collection
points for fertilizer/seeds and agriculture outputs and optimum mix of fertilizers for better yield.
(vii) Education and Training: OR can be used for obtaining optimum number of schools with their locations,
optimum mix of students/teacher student ratio, optimum financial outlay and other relevant information in
training of graduates to meet out the national requirements.
(viii) Transportation: Transportation models of OR can be applied to real life problems to forecast public
transport requirements, optimum routing, forecasting of income and expenses, project management for
railways, railway network distribution, etc. In the same way it can be useful in the field of communication.
(ix) Home Management and Budgeting: OR can be effectively used for control of expenses to maximize
savings, time management, work study methods for all related works. Investment of surplus budget,
appropriate insurance of life and properties and estimate of depreciation and optimum premium of insurance
etc.
Phases of OR study: OR is a logical and systematic approach to provide a rational basis for decisionmaking. The phases of OR must be logical and systematic. Following are the various steps for the analysis
of a problem.
1.Observe the Problem Environment: The first step of OR study is the observation of the environment in
which the problem exists. The OR analyst gets sufficient information and support to proceed and is better
prepared to formulate the problem.
2. Analyse and Define the Problem: In this step not only the problem is defined but also uses, objectives and
limitations of the study that are stressed in the light of the problem.
3. Developing a Model: The activities in this step is to defining interrelationships among
variables,formulating equations, using known OR models
4. Selection of Data Input: Activities in this step involve analysing internal-external data and facts,
collecting opinions and using computer data banks.
5. Solution and Testing: In this step the solution of the problems is obtained with the help of model and data
input. Such a solution is not implemented immediately and this solution is used to test the model and to find
its limitations if any. If the solution is not reasonable or if the model is not behaving properly, updating and
modification of the model is considered at this stage.
6. Implementation of the Solution: This is the last phase of the OR study. In OR the decision-making is
scientific but during implementation of decisions, behavioural issues are also to be considered.
Models of OR
Descriptive models describe some aspect of a situation based on observation, survey, questionnaire
result or available data
Predictive models make predictions regarding certain events
Normative models are used to describe a source of action
Physical models are pictorial representation of real systems and have the appearance of a real thing
Analogue models utilize one set of properties to represent another set of properties
Mathematical models employ set of symbols to represent the components of real system
Deterministic models assume all parameters and functional relationship with certainty
Probabilitistic or Stochastic models have atleast one parameter as a random variable
Limitations of Operations Research:
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OR techniques are expensive when compared to other less sophisticated techniques.

OR techniques provide the management with only tools to aid the decision making process and as such
is not a replacement for the human skill and intellect to decide on alternative courses of action.
In cases where basic data is subject to frequent changes, modification of OR models becomes a burden.
Models cannot represent all real life situations.
Often the decision maker is not fully aware of the limitations of the models that he is using.
Solutions obtained have limitations as they are obtained by simplifying the assumptions made.
Linear Programming Problem: Linear Programming Problem (LPP) is an optimal decision making tool in
which the objective is a linear function and the constraints on the decision problem are linear equalities and
inequalities.
A Linear Programming Problem can be solved by many methods, important of which are Graphical method
and simplex method.
Slack variable is a non-negative variable used to convert a less than or equal to constraint into an
equation, by adding it to the left hand side of the constraint.
Surplus variable is a non-negative variable used to convert a greater than or equal to constraint into an
equation, by subtracting it from the left hand side of the constraint.
For a system of m linear equations in n variables (n > m), a solution obtained by setting (n m)
variables equal to zero and solving the linear equations for the remaining m variables is called a Basic
solution.
The (n m) variables set equal to zero in any solution are called Non Basic variables.
The m variables whose values are obtained by solving the system of equations are referred to as Basic
variables.
Decision variables are the unknowns to be determined from the data of the problem.
Objective function represents an expression of the major goal of the system in term of the decision
variables.
Constraint refers to the inequalities which represent the limitations, obstacles or hurdles that a business
faces in process of achieving an objective.
Non-negativity restrictions are constraints expressed to exclude negative values of decision variables.
A set of values of the decision variable that satisfies all constraints and non-negativity restrictions of the
problem is called a Feasible solution.
Optimal solution is a feasible solution that provides the best choice among all other values. It would
yield the highest value(in case of maximization) and a lowest value(in case of a minimization) problem.
Assumptions of LPP:
The problem has only one objective.
All external factors remain stationary (constant).
Available quantities of resources and consumption per unit of products are known.
Total units of a constrained resource equals the sum of individual resource requirement of products.
The products to be manufactured and resources required can be in fractions

Advantages of LPP:
It helps in efficient use of available resources.
It helps in allocation of scarce resources.
It provides analysis of variety of multi dimensional problems.
It provides objective analysis to the art of decision making.
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 It provides an insight into the problem situation.

It helps in detecting bottlenecks in the production process.
Limitations of LPP:
Uncertainty is not allowed.
Values can sometimes range to fractions.
It requires alternative courses of action to any decision.
Parameters are kept as constant which is not possible in real life.

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