Applications of Statistics in Business and Economics
In today’s global and economic environment, anyone can access vast amounts of statistical information. The most successful managers and decision makers understand the information and know how to use it effectively.
Statistics can be referred to as numerical facts. In a broader sense, statistics is the field of study dealing with the collection, analysis, presentation and interpretation of data.
As you enter the study of statistics, you may ponder, why do I need to study this subject matter? Statistics is a critical tool for using the scientific method.
The scientific method is composed of the following steps:
1. Choose your Topic
2. Identify a Problem
3. Research the Problem
4. Form a Hypothesis
5. Design the Experiments
6. Test the Hypothesis
7. Analyze the Results
8. Formulate and Report Conclusions
As you may know, one of the first principles of the scientific method is that a hypothesis must be subjected to some kind of test. This course will introduce you to a variety of these tests.
Applications in business and economics are numerous.
Public accounting firms use statistical sampling procedures when conducting audits for their clients. For instance, suppose an accounting firm wants to determine whether the amount of accounts receivable shown on a client’s balance sheet fairly represents the actual amount of accounts receivable. Usually the large number of individual accounts receivable makes reviewing and validating every account too time consuming and expensive. As common practice in such situations, the audit staff selects a subset of the accounts called a sample. After reviewing the accuracy of the sampled accounts, the auditors draw a conclusion as to whether the accounts receivable amount shown on the client’s balance sheet is acceptable.
Financial analysts use a variety of statistical information to guide their investment recommendations. In the case...