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Total Income As. 3171 Crore
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te Retained Earnings
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BUSINESS STATISTICS
 BUSINESS STATISTICS

Dr. S.P. GUPTA Dr. M.P. GUPTA

M.Com., Ph.D. (Dethi) M.A. (Eco.): M.A. (O.R.); Ph.D.
Formerly, Head& Dean,
Formerly, Head & Dean,
Faculty of Management Studies, Faculty of Management Studies,
Univerof
sitDethi
y , Dethi University of Dethi, Dethi.

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S0 =: Sixteenth Enlarged Edition
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Sultan Chand & Sons

Educational Publishers
New Delhi
Other Books by Dr. S.P. Gupta
Statistical Methods (All India) 39h Edition
Statistical Methods for Professional Education Course
Elementary Statistical Methods for B.Com,
Statistical Methods for B.Com. (Hons.), B.A. (Hons.) Econ.
Business Statistics & Operations Research
Quantitative Methods for B.Com. | year, AP. State
Quantitative Methods for B.Com. Il year, A.P. State
Objective Type Questions in Statistics
Statistical Methods (Hindi Edn.)
MAR

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misprint o¢ mistake found in this publication. SULTAN CHAND & SONS, NEW DELHI

Fifteenth Edition 2008

| NUBLIFPaRY
Sixteenth Edition 2010

ISBN : 978-81-8054-641-9 accession ws W4846

CLASS NO.

Price
: Rs. 325.00 us P/AQLO. = 835+67,.
Published by:
SULTAN CHAND & SONS
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Printed at: New A.S. Offset, 4/203 Lalita Park, Laxmi Nagar, Delhi-110092
KEF
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Preface
To the Sixteenth Edition

The text is written with the basic object of introducing students of business
administration to the Statistical concepts that help in decision-making. An
attempt has been made to present explanation in such a way that the underlying
statistical theory is fully exposed and the relation between theory and application
thoroughly understood.
The book is essentially non-mathematical in character and an attempt has
been made to illustrate the application of statistical techniques with the help of
business data. Various types of study material are given at the end of each
chapter to aid the students in applying the principles discussed in the text. The
object is to develop the faculty of thinking amongst the students and to develop
the skill of performing the calculations needed for various methods of analysis,
We are greatly inspired by the very good response from a large number of
readers of Business Statistics in India and abroad.
Some special features of this edition are :
* The entire text of the SIXTEENTH edition has been thoroughly revised.
In particular, the chapters ¢ Correlation Analysis « Probability
* Probability Distributions ¢ Statistical Decision Theory « Small
Sampling Theory « Chi-Square Test need special mention.
¢ Looking to the trend of questions of several universities all over India,
short answer questions of 1 mark and 4 marks have been added in each
chapter to enhance the value of the book.
¢ Every effort has been made to reduce to the minimum the printing and
calculation mistakes.
We gratefully acknowledge all suggestions received to enhance further the
value of the text. The suggestions have been incorporated wherever possible.
We are grateful to Prof. Surendra Pradhan of Hayward University,
California, Mr. Rajeey Gulhar Applied Materials, USA., Dr. Sarika Gulhar and
Mr. Sameer Gupta for help in the revision of this edition.
We sincerely believe that the road to improvement is never ending. Hence,
we shall look forward to and gratefully acknowledge all suggestions received.
Ist July, 2010 S.P, GUPTA
M.P. GUPTA
 Acknowledgements
The authors gratefully acknowledge the inspiration, encouragement, guidance, help and valuable
suggestions received from the following well-wishers.
Prof. Abad Ahmad, FormerPVC, ly Univerof Delhi.
sity
Prof. B.S. Sharma, Formerly Vice Chancellor, Kota Open University, Kota.
Dr. Gan Mani,
eshHead, Dept. of Cardiology, Delhi Heart & Lung Institute, ND.
Dr. A.B. Ghosh, FRCS, North End MediCentre, care Delhi.
Prof. B.P.Singh, Former Dean, Faculty of Commerce & Business, University of Delhi.
Prof. Thomas Gladwin, New York University, Graduate, School of Business Administration. USA.
Prof. R.N. Goyale, Former Head, Dept. of Business Studies, University of Delhi.
Mr. Rajeev Guthar, Sr. Systems Manager, Applied Materials, USA.
Ms. Sarika Gulhar, HRD Manager, CASCADE Promotion Corporation, California.
Mr. Sameer Gupta, Wipro Technologies, USA.
Prof. J.D. Aggarwal, Executive Director, Indian Institute of Finance, Delhi.
Prof. Y.P. Singh, Former Head, Dept. of Business Studies, University of Delhi.
Prof. S.K. Gupta, Florida International University, Miami, USA.
Prof. H.B. Singh, University of Delhi, Delhi.
Prof. N.S. Bisht, Head, Dept. of Commerce, Kumaun Univernity, Nainital.
Prof. N.L. Dhamija, MDI, Gurgaon.
Mr. G.P. Gupta, Former Chairman, IDB.
Prof. K.L, Krishna, Delhi School of Economics, University of Delhi
Prof, T.C. Majupuria, Tribhuvan University, Kathmandu, Nepal.
Prof. B.N. Nagnur, Dept. of Statistics, Karnataka University, Dharwar.
Prof. Gabor Parniczky, Karl Marx University, Budapest.
Prof. Surendra Pradhan, California State University, California.
Late Mr. Prakash Chand, Sultan Chand & Sons, New Delhi.
Prof. Nageshwar Rao, Director, Pt. Jawaharlal Nehru Institute of Management, Ujjain.
Prof. J.V Prabhakar Rao, Dept. of Commerce & Management Studies, Andhra University, AP.
Dr. Govardhan Reddy, Head, Dept. of Commerce, Osmania University, Hyderabad.
Prof. Y.P. Sabharwal, Dept. of Mathematical Statistics, Ramjas College, University of Delhi.
Dr. N.C. Goel, Pitampura, Delhi.
Prof. Kanwar Sen, Dept. of Statistics, University of Dethi.
Prof. Fayyaz Ahmad, Dean, Faculty of Commerce & Management, University of Kashmir.
Mrs. & Dr. Vijay Kansal, Pitampura, Delhi. :
Dr. Subhash Talwar, Putampura, Delhi.
 Brief Contents

Why
andhat
Business Statistics—W 1-15

2. Collection of Data 16-36

Presentation
of Data 37-81

Measures
of Central Tendency 82-124
ay

Measures
of Variations 125-171

Skewness, Moments and Kurtosis 172-198

Correlation Analysis 199-237B

ee

238-271
Regression Analysis
index Numbers : Concepts and Applications 272-320

and Time Series Analysis

Business Forecasting 321-386
a

Probability 387-414
=
-

Probability Distributions 415-457

REG H

Sampling and Sampling Distributions 458-486

PeUBRARER

Estimation
of Parameters 487499

Tests
of Hypothesis 500-517
518-542
Sma!] Sampling Theory
Chi-Square Test 543-575

Analysis
of Variance 576-602

Suitistical Quality Control 603-638

Partial and Multiple Correlation and Regression

Statistical Decision Theory

Questions Paper
APPENDIX
: Statistical Tables 687-702
 Contents
Chapter Pages
1. Business Statistics—What and Why 1-15
Introduction 1
Statistics Defined

wv
Statistical Data

& wh
Statistical Methods

ann
Statistics : Science or Art
Functions of Statistics
Scope of Statistics
(i) Statistics and State
(ti) Statistics in Business and Management

wn
(iii) Statistics and Economics
(iv) Statistics and Physical Sciences 10
(v) Statistics and Natural Sciences. 11
(vi) Statistics and Research 1
(vii) Statistics and Other Uses 1]
Statistics and the Computer 12
Limitations of Statisti
12
Distrust of Statistics 13
Problems 13
2. Collection of Data 16-36
Introduction 16
(a) Secondary Data 16
(b) Internal Data 17
(c) Primary Data 17
Designing a Questionnaire 18
Structured and Unstructured Questionnaires 19
Pre-Testing the Questionnaire 23
Specimen Questionnaire 24
Questionnaire | 24
Questionnaire 2 27
Editing Primary Data 31
Problems 32
3. Presentation of Data 37-81
Introduction 37
Classification of Data 37
Types of Ciassification 37
244 Business Statistics
'
CALCULATION OF REGRESSION BQUA’ "ON
(¥- Y) i
TestScore | (X- x) Sales
Salesmen |
x y y? = *
x x x
2.5 -15 2.25 Sad
1 40 -20 400 4.00 2
+10 100 6.0 +2.0
2 70 0 0 t
50 -10 100 4.0 i
3 5.0 1.0 1.00
4 60 0 0 t
4.0 0 0
5 80 +20 400 as
100 2.5 -1.5 2.25
6 50 -10 2.25 345
900 5.5 +15
7 90 +30
3.0 -1.0 1.00 8
8 40 -20 400 0.25 y
0 0 45 +05
9 60 -1.0 1.00
60 0 0 3.0
10
LY=40 Iy=0 t= | igs &
N=10 LY = 600 Ex=0 | f° =2400|

- pSva = ad
10 «60:
-) = syv = 10 a4
yy =

Sey 130 ‘
wr = <a r 2,400 = 0.054
s is given as”
The regression equation of sales and test score
y-4 = 0.084 (\- 60)
) = 076+ 0.0541
When Vis 100, } would be
) = 0.76 + 0.054 (100) = 6.16.
thousand rupees.
the most prob able week ly sales volu me if salesman makes a score of 100 is 6.16
Lhus
Means
Deviations taken from Assumed plifiebyd =
actu al mea ns of Van d ¥ vari able s are in fractions, the calculations can be sim
Whe n on coefficient, will be cae =,.2
the deviations from the assumed mean, The value of 6, .e., the regressi
as follows : , 5
Regression equation of X on) (N- X¥) = 6 0- Y)
NEd,d,-Xdid, »
-—
wie O” NEd, (2d, )°
¥)
Regression equation of Y on X:) — yr b W-
* Nid,d, -d,Sd, 4 ’
where 6* Nid," - (id,¥

ban d bar e dete rmin ed in the abov e manner, the regression equations cam
Once the values of
obtained very easily, : l profit. The following ate
A comp any wants lo assce > the impac t of R & D expenditure of its annua
{ustration. 4. “
the mtor mati on for the last cight years
prese nts
2010 004 2008 00" 10049 2008 7B
View
it & VD cxpenaitare <
<= 10 4
* 3
ha eo)
Avital Protit
0 ” “4 ae
4s a 4
Be O00)
tor av allocated suin-ot Rs 100.000 as 2 |
state Curation atid predict (et annual profit for 200
Posrtnaales he Pere
spore tury

| ot BR & Despendiinie be denoied by and avonal prot by |

Solution,
 (x)

B. Median 89
Calculation of Median—-Ungrouped Data 90
Calculation of Median—Grouped Data 90
Merits and Limitations of Median 92
Related Positional Measures or Quantities 92
Computation of Quartiles, Deciles, Percentiles, etc. 93
Determination of Median, Quartiles, etc., Graphically 94
C. Mode . 95
Calculation of Mode | %
Calculation of Mode—Ungrouped Data 96
Calculation of Mode—Grouped Data 97
Locating Mode Graphically 98
Merits and Limitations of Mode 99
Relationship among Mean, Median and Mode 99
D, Deometric Mean 99
Calculation of Geometric Mean 100
Compound Interest Formula 100
Applications of Geometric Mean 101
Combined Geometric Mean 102
Merits and Limitations of Geometric Mean 102
E, Harmonic Mean 103
Applications of Harmonic Mean 104
Merit and Limitations of Harmonic Mean 105
Relationship among the Averages 105
Progressive Average 106
Which Average to use ? 106
Arithmetic Mean 107
General Limitations of an Average 107
Problems 118
5. Measures of Variations 125-171
Significance of Measuring Variation 126
Properties of a Good Measure of Variation 127
Methods of Studying Variation 127
Absolute and Relative Measures of Variation 127
L Range 128
Merits and Limitations of Range 128
Uses of Range 129
Il. The Interquartile Range or Quartile Deviation 129
Computation of Quartile Deviation 130
Merits and Limitations of Quartile Deviation 131
 (xt)

Conditions for the Use of Probable Error

213
Merits and Limitations of the Pearsonian Coefficient
213
Coefficient of Determination*
214
Ill. Rank Correlation Coefficient
215
A. Where Actual Ranks are Given.
215
B. Where Ranks are not Given.
217
Equal Ranks or Tie in Ranks
217
Merits and Limitations of the Rank Method
219
When to Use Rank Correlation Coefficient
219
IV. Method of Least Squares
220
Lag and Lead in Correlation
220
Problems
233
Regression Analysis
238-271
Introduction
238
Difference between Correlation and Regression
239
Regression Analysis
239
The Linear Bivariate Regression Model
239
Regression Lines
240
Regression Equations
240
Regression Equations of Y on X
240
Regression Equation of X on Y
241
Deviations taken from Arithmetic Means of XY and Y
243
Deviations taken from Assumed Means
244
Regression Coefficients
245
Regression Equations in Bivariate
248
Grouped Frequency Distributions
248
Standard Error of Estimate
250
Coefficient of Determination
251
Miscellaneous I!lustrations
251
Problems
264
Index Numbers : Concepts and Applications
272-320
Introduction
272
Uses of Index Numbers
273
Classification of Index Numbers
274
Problems in the Construction of Index Numbers
274
Methods of Constructing Index Numbers
277
A. Unweighted Index Numbers
278
I. Simple Aggregative Method
278
Limitations of the Method
833

ll. Simple Average of Relatives Method

Merits and Limitations of this Method
 (xiii)

B. Weighted Index Numbers 280

1. Weighted Aggregative Index Numbers 280
IL Weighted Average of Relative Index Numbers 284
Merits of Weighted Average of Price Relatives Method 286
Quantity Index Numbers 286
Volume Index Numbers 287
Tests for Perfection 287
1. Time Reversal Test 287
2. Factor Reversal Test 288
3, Circular Test 289
The Chain Index Numbers 291
Steps in Constructing Chain Index
Conversion of Chain Index to Fixed Base Index
Merits and Demerits of the Chain Base Method
Base Shifting, Splicing and Deflating the Index Numbers
Base Shifting
Splicing
Use of Index Numbers in Deflating
Consumer Price Index Numbers
Meaning and Need
Utility of the Consumer Price Indices
Construction of a Consumer Price Index
Methods of Constructing the Index
Precautions while Using Consumer Price Index
Index Number of Industrial Production 303
Limitations of Index Numbers 304
Miscellaneous Illustrations 305
Problems 316
10. Business Forecasting and Time Series Analysis 321-386
Introduction 321
Steps in Forecasting 322
Requirements of a Good Forecasting System 322
Methods of Forecasting 323
Business Forecasting and Time Series Analysis 328
Components of Time Series 330
1 Secular Trend 331
Factors Affecting Trend 332
2. Seasonal Variations 333
3. Cyclical Variations 334
4. Irregular Variations* 335
 (xiv)

Problems of Classification 336

Preliminary Adjustments before Analysing Time Series 336
Straight-line Trend—Methods of Measurement 337
Freehand or Graphic Method 337
Merits and Limitations of the Freehand Method 338
Method of Semi-Averages 339
Method of Least Squares
Merits and Limitations
Non-Linear Trend 345
1. Freehand or Graphic Method 345
Method of Moving Averages 345
Second Degree Parabola
Measuring Trends by Logarithms 350
Exponential Trends 350
Second Degree Curves Fitted to Logarithms 352
Growth Curves 352
Conversion of Annual Trend Values to Monthly Trend Values 353
Shifting the Trend Origin 353
Selecting Type of Trend 354
Choice of the Trend Period 354
Trend Extrapolation 354
Measurement of Seasonal Variations 355
Method of Simple Averages 356
Ratio-to-Trend Method 357
Merits and Limitations of the Ratio-to-Trend Method 359
Ratio-to-Moving Average Method 359
Average Method 363
Link Relatives Method 363
Which Method to use 365
Average in Computing Seasonals
SESSSRE

Eliminating Seasonal Influences

Uses and Limitations of Seasonal Index
Measurement of Cyclical Vanations
Residual Method
Reference Cycle Analysis or the National Bureau Method
Measurement of Irregular Variations
Sclecting the Appropriate Forecasting Technique 370
Cautions while using Forecasting Techniques 371
Miscellaneous illustrations = — 372
Problems 380
 (xv)
"Probability
| What is Probability 387-414
387
|. The Classical Approach
2. Relative Frequency Approach 388
3 The Axiomatic Approach* 388
4. The Personalistic Approach’ 389
Elements of Set Theory 390
Roster or Tabulation Method 390
Rule or Defining Property Method 391
Universal set 39]
Null Set 391
Subset 391
Equal Sets 391
Set Operations 391
Intersection of Sets 39)
Disjoint sets 391
Union of sets 392
392
Difference of Two Sets
Counting Techniques 393
Factonals 394
394
Permutations
Combinations 394
Random Experiment 395
Events 395
Elementary Events 395
Compound Events 395
Mutually Exclusive Events 395
» 395
Collectively Exhaustive Events
Complementary Events 396
Equally likely Events 396
Probability Laws 396
Addition Law 396
Conditional Probability 396
Multiplication Law 398
398
Dependent Events
Independent Events 398
Bayes’ Theorem
399
Miscellaneous [Ilustrations 399
Problems 400
408
- Probability Distributions
Random Variable 415-457
415
 (xvi)

Probability Function 415

Discrete Probability Function 415
Probability Mass Function 416
Cumulative Mass Function 416
Continuous Probability Function 416
Probability Density Function 416
Cumulative Density Function 416
Expected Value and Variance 416
Properties of Expected Value and Variance 417
Binomial Distnbution 417
Mean and Variance of Binomial Distribution 420
Poisson Distribution 423
Mean and Variance of the Poisson Distribution 424
Form of the Poisson Distribution 425
Negative Binomial Distribution 427
Multinomial Distribution 429
Hypergeometric Distribution 430
Normal Distribution 431
Relation between Binomial, Poisson and Normal Distribution 432
The Standard Deviation and the Normal Curve 433
Moments of the Normal Distribution 433
Properties of the Normal Distnbution 434
Importance of Normal Distribution 435
Area under the Normal Curve 435
Applications of the Normal Distribution 437
Fitting of Normal Distribution 438
YJniform Distribution 439
Exponential Distribution 440
Miscellaneous Illustrations 440
Problems 451
13. Sampling and Sampling Distributions 458 486
Introduction 458
Purpose of Sampling 459
Principles of Sampling 459
Principle of Statistical Regularity 459
Principle of Inertia of Large Numbers 459
Methods of Sampling 460
Random Sampling Methods 460
1, Simple Random Sampling* 460
Methods of Obtaining a Simple Random Sample 461
Il. Stratified Sampling 462