Statistics is a science that helps businesses in decision-making. It entails the collection of data, tabulation, and inference making. In essence, Statistics is widely used in businesses to make forecasts, research on the market conditions, and ensure the quality of products. The importance of statistics is to determine the type of data required, how it is collected, and the way it is analyzed to get factual answers.
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Statistics is the collection of numerical facts and figures on such things as population, education, economy, incomes, etc. Figures collected are referred to as data. The collection, analysis, and interpretation of data are referred to as statistical methods (Lind, Marchal, & Wathen, 2011).
Two subdivisions of the statistical method are:
- Descriptive statistics: Deals with compilation and presentation of data in various forms such as tables, graphs, and diagrams from which conclusions can be drawn and decisions made. Businesses, for example, use descriptive statistics when presenting their annual accounts and reports.
- Mathematical/inferential/inductive statistics: This deals with the tools of statistics. These are the techniques that are used to analyze, make estimates, inferences, and conclude the data collected (McClave, Benson, & Sincish, 2011).
Importance of Statistics
Statistics have been collected since the earliest times in history. Rulers needed to have data on population and wealth so that taxes could be levied to maintain the state and the courts. Details on the composition of the population were necessary to determine the strength of the nation. With the growth of the population and the advent of the industrial revolution in the 18th and 19th centuries, there was a need for greater volumes of statistics in an increasing variety of subjects such as production, expenditure, incomes, imports, and exports. In the 19th and 20th centuries, governments worldwide took more control in economic activities such as education and health. This led to the enormous expansion of statistics collected by governments (Lind, Marchal, & Wathen, 2011).
The government’s economic activities have expanded in the last three centuries and so have the companies/businesses grown, as well. Indeed, some have grown to such an extent that their annual turnover is greater than the annual budgets of some governments. Big firms have to make decisions based on data. The companies collect data on their own other than these sources to establish:
- Customer needs
- Production and personnel costs
- Accounting reports on liabilities, assets, losses, and income
The tools of statistics are important for companies in areas such as planning, forecasting, and quality control (McClave, Benson, & Sincish, 2011).
Examples of How Statistics Can Be Used
To Ensure Quality
A continuous check into quality using programs is very helpful in ensuring that only quality products come out of production firms. This, in turn, ensures that there is minimum wastage or errors in the production of goods and services (McClave, Benson, & Sincish, 2011).
Statistics are good in revealing relationships between variables – a good example is when a company makes a close relationship between the numbers of dissatisfied customers and the turnover. Indeed, there is an inverse relationship between the number of dissatisfied customers and turnover.
With only a small sample of the population studied, the management can come up with a concrete understanding of how the customers will relate to their products. This, therefore, will help them decide on whether to or not continue with that line of production (Lind, Marchal, & Wathen, 2011).
Lind, D., Marchal, G., & Wathen, A. (2011). Basic statistics for business and economics (7 th ed.). New York, NY: McGraw-Hill/Irwin.
McClave, T., Benson, G., & Sincish, T. (2011). Statistics for business and economics (11 th ed.). Boston, MA: Pearson-Prentice Hall.