Business Statistics

BBS FIRST YEAR

Dr. Basanta Dhakal

Professor
Nepal Commerce Campus, TU, Ktm.

Prakash Man Dongol

Associate Professor
Tri-Chandra Multiple Campus, TU, Ktm.

Dr. Govinda Tamang

Associate Professor
Central Department of Management, TU, Ktm.

Pravat Uprety
Lecturer
Central Department of Management, TU, Ktm.

Dwarika Prasad Gautam

Lecturer Business Statistics
Lumbini Banijya Campus, Butwal
Edition: First 2006
Hari Kumar Shrestha Second Edition 2013
Lecturer Third Edition 2019
Shanker Dev Campus, TU, Ktm.
Text © reserved by authors, press processing, layout, design and formatting © reserved by
publishers.
Nanda Kumar Tharu
Associate Professor Publisher: Buddha Publications Pvt. Ltd.
Tri-Chandra Multiple Campus, TU, Ktm. Anamnagar (Buddha Complex)
Kathmandu–29, Nepal
Tel. 00977-1-5705165, 5705210, 5705177
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Price Rs.595.00
ISBN: 978–9937–30–338–5
Printed in Nepal
Preface Syllabus
Business Statistics enhances our understanding of all Course No: MGT 202 Full Marks: 100
sciences-social, physical and natural. It is applied mathematics
Nature of the Course: Compulsory Pass Marks: 35
of finding numerous applications in various diversified fields
such as agriculture, industry, sociology, biometry, planning, Lecture hour: 150
economics, business, management, insurance, accountancy and
auditing and so on. We are sure after studying this book; the Course objective
reader will develop skill to make conclusions of real situations The basic objective of this course is to provide students an understanding of
occurring in business, industry, management etc. Each chapter concepts of business statistics and to acquaint the students with necessary
of this book includes the necessary theory and methods of statistical and mathematical tools and techniques to be used in business
carrying out the various techniques and analysis with suitable decision-making processes.
examples. Other than providing useful guidance to the students
in several professional and competitive examinations, this book Course Details
is a modest though determined bid to serve as a text-book, for Unit 1: Introduction to Statistics 5 LHs
BBA, and BIM.
Meaning, scope and limitation of statistics; Importance of statistics in
We hope that all readers will find the presentation and business and management; Types and sources of data; Methods of
exposition of the subject quite lucid and easy to understand. It is collection of primary and secondary data; Precautions in using
fundamental of applied statistical techniques and more secondary data; and Problems of data collection.
interesting subjects. The readers will be able to grasp the basic
and theoretical concept of statistics and application of different Unit 2: Classification and Presentation of Data 5 LHs
statistical tools and techniques in practical life. Data classification: meaning, need, objectives and types of
classification; Construction of frequency distribution and its principles;
Our sincere thanks go to Mr. Nabaraj Bajgain, Managing Presentation of data: tabular presentation, diagrammatic presentation:
Director of Buddha Publications Pvt. Ltd. for taking all the bar diagram, Pie diagram, graphic presentation: histogram, frequency
responsibilities of publishing and distributing this book. At the polygon, frequency curve and ogive.
same time we appreciate and thank to Mr. Dipendra Shrestha
(Illustrations related to Business and Management).
and Ms. Rajani Shrestha for excellent desktop work.
Unit 3: Measures of Central Tendency 15 LHs
We also express our deep gratitude to all those for inspiring and
supporting us directly or indirectly to have the book published. Mean: simple and weighted (Arithmetic Mean, Geometric Mean and
Harmonic Mean); Median; Partition values; Mode; Properties of
Any healthy suggestions and criticism for further improvement averages; and Choice and general limitations of an average.
of the book and correction of errors from the readers will be
gratefully accepted. Unit 4: Measures of Dispersion 15 LHs
Absolute and Relative measures; Range; Quartile deviation; Standard
deviation; Coefficient of variation; and Lorenz curve.
Authors
Unit 5: Skewness, Kurtosis and Moments 15 LHs
Meaning, objective and measurement of Skewness; Karl Pearson’s and
 Bowley’s methods; Five number summary; Box-Whisker Plot; Kurtosis Introduction to Quantitative Analysis; Application of management
and its measurement by Percentile method; Meaning of moments; science: scientific approach to decision making; Decision making under
Central and raw moments and their relationship; and Measurement of Definition and types of Matrix; Addition, subtraction and
Skewness and Kurtosis by method of moment. multiplication of matrices; Cofactors; Transpose; Adjoint and inverse of
a matrix; Matrix method to solve simultaneous equations up to three
Unit 6: Simple Correlation and Regression Analysis 15 LHs unknown variables. the condition of uncertainty: maximax (optimism),
Karl Pearson’s correlation coefficient including bi-variate frequency maximin (pessimism), minimax regret; Decision making under risk :
distribution; Coefficient of determination; Probable Error(P.E.); Expected Profit (EP) Or Expected Monetary value (EMV), Expected
Spearman’s rank correlation coefficient; Concept of linear and Profit with perfect Information (EPPI), Expected Value of Perfect
non-linear regression; Simple linear regression equations including Information (EVPI); Linear Programming Problem (LPP): Problem
bi-variate frequency distribution; and Properties of regression formulation with two decision variables, graphical solution of
coefficients. maximization and minimization problems.

Unit 7: Analysis of Time Series 15 LHs Unit 12: Determinant 10 LHs

Meaning, need and components of time series; Measurement of trend: Definition of determinant; Methods of finding the numerical values of
semiaverage, moving average, method of least squares; Measurement determinant up to three order; Properties of determinant and its use to
of seasonal variation: method of simple average and ratio to moving find the numerical values of determinants; and Cramer’s rule to solve
average (only quarters). simultaneous equations up to three variables.

Unit 8: Index Numbers 15 LHs Unit 13: Matrix 10 LHs

Meaning and types of Index Number; General rule and problems in Definition and types of Matrix; Addition, subtraction and
construction of index number; Methods of constructing index numbers: multiplication of matrices; Cofactors; Transpose; Adjoint and inverse of
simple and weighted (aggregative and average of price relative a matrix; Matrix method to solve simultaneous equations up to three
method), Laspeyre’s index number, Paasche’s index number, Fisher’s unknown variables.
ideal index number; and Time and factor reversal tests.
Cost of living index number (or Consumer’s price index number): Note: Illustrations and applications in all chapters should be based on
aggregative expenditure method and family budget method; and Base Business and Management situation as far as possible.
shifting and deflating.
Suggested Readings:
Unit 9: Probability 10 LHs 1. Gupta, S.C., Fundamentals of Statistics for Management, Mumbai: Himalayan
Definition of probability; Addition and multiplication theorem; Publishing House.
Application of combination rule in probability; and Conditional 2. Tulsian, P.C. & Pandey, Vishal, Quantitative Techniques: Theory and Problems,
probability. New Delhi: Pearson Education.
3. David, M., Levine, Timothy, C. Krehbiel, & Mark, L. Berenson, Business
Unit 10: Sampling and Estimation 5 LHs Statistics A first course, USA: Prentice Hall.
Meaning of sample and population; Census versus sampling; Sampling 4. Gupta , S.P., Statistical Methods, New Delhi: Sultan Chand and Sons.
techniques; Concept of sampling distribution; Standard error;
5. Levine, Richard I, and Dabid S. Rubin, Statistics for Management, New Delhi:
Estimation: estimator, concept of types of estimates: Point and Interval
Prentice hall of India Pvt. Ltd.
estimates.
6. Aitken , A.C. , Determinant and Matrices, UK: Amazon.
Unit 11: Quantitative Analysis 15 LHs
 Open Ended Classes and Close Ended Classes .................. 23
Contents Methods of Converting Inclusive Classes into Exclusive
Classes ...................................................................................... 25
Method of Converting Mid Values into Class Intervals .... 25
Cumulative Frequency Distribution ..................................... 26
Bivariate Frequency Distribution .......................................... 27
Tabulation of Data .................................................................. 28
Chapter 1 Introduction to Statistics Difference between Classification and Tabulation ............. 29
Meaning of Statistics ............................................................... 1
Parts of Tabulation .................................................................. 29
Definition of Statistics ............................................................ 2
Structure of a Table ................................................................. 30
Importance and Scope of Statistics ....................................... 2
Simple and Complex Table .................................................... 30
Application of Statistics ......................................................... 3
Exercise 2 (A) ........................................................................... 31
Characteristics of Statistics .................................................... 4
Introduction ............................................................................. 34
Functions of Statistics ............................................................. 5
Difference between Diagrams and Graphs ......................... 35
Limitations of Statistics .......................................................... 5
Essentials of a Good Diagram ............................................... 35
Exercise 1 (A) ........................................................................... 6
Types of Diagrams .................................................................. 35
Data Collection ........................................................................ 6
Bar Diagrams ........................................................................... 36
Introduction ............................................................................. 6
Angular Diagram or Circular Diagram or Pie Chart .......... 42
Types of Data ........................................................................... 6
Graphical Presentation ........................................................... 45
Sources of Primary Data ........................................................ 7
Exercise 2 (B) ............................................................................ 55
Sources of Secondary Data .................................................... 8
Methods of Collection of Primary Data ............................... 8
Precautions in the use of Secondary Data ............................ 12 Chapter 3 Measures of Central Tendency
Problems Involved in Collecting the Primary Data ........... 13 Introduction ............................................................................. 59
Problems in Collecting Secondary Data ............................... 13 Definition ................................................................................. 59
Differences between Primary Data and Secondary Data ... 13 Characteristics of a Good Measure of Central Tendency
Exercise 1 (B) ........................................................................... 14 or an Average .......................................................................... 60
Types of Measure of Central Tendency ............................... 60
Arithmetic Mean ..................................................................... 60
Chapter 2 Classification and Presentation of Geometric Mean ...................................................................... 77
Data Harmonic Mean (HM) ............................................................ 80
Raw Data .................................................................................. 15 Weighted Harmonic Mean .................................................... 83
Classification ........................................................................... 15 Median (Md) ............................................................................ 84
Needs of Classification ........................................................... 16 Partition Values ....................................................................... 92
Types of Classification ........................................................... 16 Mode (M0) ................................................................................ 106
Variables ................................................................................... 18 Empirical Relation between Mean, Median and Mode ...... 110
Frequency ................................................................................. 18 Characteristics of a Good Statistical Average ..................... 115
Use of Symbols ........................................................................ 19 List of Important Formulae ................................................... 116
Frequency Distribution .......................................................... 19 Exercise 3 .................................................................................. 117
Univariate Frequency Distribution ....................................... 19
Chapter 4 Measures of Dispersion Chapter 6 Simple Correlation and
Introduction ............................................................................. 127
Definitions ............................................................................... 128
Regression Analysis
Introduction ............................................................................. 217
Objectives of Measuring the Dispersion .............................. 128
Method of Measuring the Measures of Dispersion ............ 128 Correlation ............................................................................... 218
Absolute and Relative Measures ........................................... 129 Definition ...................................................................... 218
Characteristics of a Good Measure of Dispersion .............. 129 Importance .................................................................... 218
Range ....................................................................................... 129 Correlation and Causation ..................................................... 219
Quartile Deviation or Semi-inter Quartile Range ............... 131 Types of Correlation ............................................................... 220
Standard Deviation ................................................................. 134 Positive and Negative Correlation ................................ 220
Coefficient of Standard Deviation ................................. 144 Linear and Non-Linear Correlation .............................. 221
Coefficient of Variation ................................................. 144 Simple, Partial and Multiple Correlation ..................... 221
Lorenz Curve ........................................................................... 152 Methods of Studying Simple Correlation ............................ 222
List of Important Formulae ................................................... 154
Scatter Diagram ............................................................ 222
Exercises 4 ................................................................................ 155
Karl Pearson's Coefficient of Correlation ....................... 223
Bivariate Correlation Method ........................................ 225
Chapter 5 Skewness, Kurtosis and Moments Properties of Correlation Coefficient .................................... 235
Introduction ............................................................................. 162 Interpretation of Correlation Coefficient ............................. 235
Skewness .................................................................................. 162 Probable Error (P.E.) ............................................................... 232
Absolute Measures of Skewness .................................... 164 Karl Pearson's Correlation in Bivariate Frequency Table .. 237
Methods of Studying Coefficient of Skewness (Sk) ....... 164 Merits and Demerits of Karl Pearson's Coefficient of
Kurtosis .................................................................................... 182 Correlation .................................................................... 239
Definition ...................................................................... 182 Rank Correlation ..................................................................... 240
Measure of Kurtosis ...................................................... 183 Properties of Rank Correlation Coefficient .................... 240
Moments .................................................................................. 186 Methods of Studying Rank Correlation Coefficient ........... 241
Central Moments .......................................................... 187 Regression Analysis ................................................................ 247
Raw Moments ............................................................... 190 Uses of Regression Analysis .......................................... 248
Relation between Central Moments and Raw Moments 191
Comparison of Correlation and Regression Analysis ........ 248
Skewness based on Moments ......................................... 191
Regression Equation (Lines of Regression) ......................... 249
Kurtosis based on Moments .......................................... 192
Alternative Method to Calculate Regression Equations 253
Mean, Variance, Skewness and Kurtosis in Terms of
Moments ....................................................................... 192 Calculation of Regression Coefficients .......................... 253
Five Number Summary .......................................................... 202 Properties of Regression Coefficients ................................... 258
Box and Whisker Plot (Boxplot) ............................................ 203 Sum of Squares Decomposition ............................................ 265
List of Important Formulae ................................................... 208 Coefficient of Determination ................................................. 266
Exercises 5 ................................................................................ 209 List of Important Formulae ................................................... 269
Exercises 6 ................................................................................ 270
 Weighted Quantity Index Number ............................... 323
Chapter 7 Analysis of Time Series Value Index Number .............................................................. 325
Introduction ............................................................................. 280
Test of Consistency of Index Number .................................. 325
Purpose of Time Series Anaysis ............................................ 281
Consumer’s Price Index Number .......................................... 328
Components of Time Series ................................................... 281
Construction of cost of Living index Numbers ............. 328
Time Series Decomposition Models ..................................... 282
Base Shifting ............................................................................ 336
Multiplicative Model .................................................... 282
Deflating of the Index Number ............................................. 338
Additive Model .............................................................. 283
List of Important Formulae ................................................... 341
Methods of Measurement of Trend in Time Series ............ 283
Exercises 8 ................................................................................ 342
Graphical or Freehand Curve Method ........................... 283
Semi-Average Method ................................................... 284
Moving Average Method .............................................. 285 Chapter 9 Probability
Method of Least Squares ............................................... 287 Introduction ............................................................................. 350
Shifting of the Origin .............................................................. 294 Basic Terms used in Probability Theory .............................. 350
Conversion of annual Trend Equation to Monthly or Types of Events ....................................................................... 352
Quarterly Trend Equation ............................................ 295 Permutation and Combination ............................................. 353
Seasonal Variation and Seasonal Indices ............................. 297 Permutation .................................................................. 353
Measurement of Seasonal Variations ................................... 397 Combination .................................................................. 354
Method of Simple Averages ........................................... 397 Definition of Probability ........................................................ 354
Ratio to Moving Average Method ........................................ 300 Mathematical or Classical or Priori Approach .............. 354
Multiplicative Model .................................................... 300 Statistical or Empirical or Relative Frequency Approach 355
Additive Model .............................................................. 301 Subjective Approach ...................................................... 356
Exercises 7 ................................................................................ 304 Axiomatic Approach ...................................................... 357
Exercise 9(A) ............................................................................ 365
Theorems of Probability ......................................................... 367
Chapter 8 Index Numbers Additive Law of Probability .......................................... 367
Introduction ............................................................................. 310
Multiplicative Law of Probability ................................. 369
Types of Index Number ......................................................... 311
Multiplicative Theorem of Probability .......................... 373
Problems in the Construction of Price Index Number ....... 311
Exercise 9(B) ............................................................................. 376
Characteristics of Index Numbers ........................................ 313
Uses of Index Numbers .......................................................... 313
Notations and Terminology .................................................. 313 Chapter 10 Sampling and Estimation
Methods of Constructing Index Number ............................ 314 Introduction ............................................................................. 380
Price Index Number ............................................................... 315 Sampling .................................................................................. 381
Unweighted Price Index Number .................................. 315 Sampling Frame ............................................................ 381
Weighted Price Index Number ...................................... 317 Census versus Sample Enumeration ............................. 381
Quantity Index Number ......................................................... 322 Principles of Sampling ........................................................... 382
Unweighted Quantity Index Number ........................... 323
 Objectives of Sampling ........................................................... 382 Linear Inequalities in Two Variables .................................... 426
Types of Sampling .................................................................. 382 Solution Set of an Inequality ......................................... 427
Types of Random Sampling (Probability Sampling) .......... 383 Procedure of Graphing a Linear Inequality ................... 428
Simple Random Sampling ............................................. 383 System of Linear Inequalities ................................................ 430
Stratified Sampling ....................................................... 384 Exercise 11(B) ........................................................................... 447
Systematic Sampling ..................................................... 385
Cluster Sampling .......................................................... 386
Multistage Sampling ..................................................... 386 Chapter 12 Determinants
Types of Non-random Sampling (Non-probability Determinants ........................................................................... 452
Sampling) ................................................................................. 387 Value of Determinant of Order 1 .......................................... 452
Judgment Sampling ....................................................... 387 Value of Determinant of Order 2 .......................................... 453
Convenience Sampling .................................................. 388 Value of Determinant of Order 3 .......................................... 454
Quota Sampling ............................................................ 388 Exercise 12(A) .......................................................................... 456
Census vs. Sampling ............................................................... 389 Properties of Determinants .................................................... 458
Sampling Distribution of a Statistic ...................................... 389 Systems of Linear Equations ................................................. 466
Standard Error (S.E.) of a Statistic ......................................... 390 Cramer's Rule (Two Unknowns) .................................. 467
Utility of Standard Error (S.E.) .............................................. 391 Cramer's Rule (Three Unknowns) ................................ 467
Sampling and Non- Sampling Error ..................................... 394 Equilibrium Condition ........................................................... 472
Sampling Errors ............................................................ 395 Exercise 12(B) ........................................................................... 474
Non Sampling Errors .................................................... 395
Estimation ................................................................................ 396
Introduction .................................................................. 396 Chapter 13 Matrices
Types of Estimates ......................................................... 347 Introduction ............................................................................. 480
Exercise 10 ................................................................................ 400 Matrices .................................................................................... 481
Notations ....................................................................... 482
Sizes of Matrices ........................................................... 482
Chapter 11 Quantitative Analysis Types of Matrices .................................................................... 484
Introduction to Quantitative Analysis ................................. 401 Algebra of Matrices ................................................................ 487
Application of Management Science .................................... 403 Equal Matrices .............................................................. 487
Introduction to Decision Making .......................................... 405 Addition of Matrices ............................................................... 488
Important Terminologies ....................................................... 405 Scalar Multiplication of a Matrix ................................. 488
Decision-making Environment ............................................. 407 Subtraction of Matrices ................................................. 489
Decision Making Under Risk ................................................ 412 Multiplication of Matrices ............................................ 489
Expected Profit with Perfect Information (EPPI) ......... 412 Properties of Matrix Addition and Multiplication ............. 492
Marginal Analysis Approach ........................................ 413 Transpose of a Matrix ............................................................. 492
Exercise 11(A) ............................................................... 419 Properties of Transpose of a Matrix ..................................... 493
Linear Programming .............................................................. 425 Exercise 13(A) .......................................................................... 508
Determinant of a Square Matrix ............................................ 514
Cofactors and Matrix of Cofactors ........................................ 514
Adjoint Matrix ......................................................................... 514
Singular or Non-Singular Matrix .......................................... 517
Inverse of Matrix ..................................................................... 517
Methods of Determining Inverse Matrices .......................... 517
Adjoint Matrix Method .............................................. 518
Definition Method ...................................................... 520
System of Liner Equation ....................................................... 522
Inverse Matrix Method .............................................. 522
Exercise 13(B) ........................................................................... 528

TU Exam Questions ............................................................... 532

References ............................................................................... 552