The Role of Statistics in Business Decision Making

This assignment examines the crucial role of statistical tools in assessing various aspects of a firm's performance. It emphasizes how managers can utilize these tools to make sound business decisions, including project selection. The analysis highlights the need for applying project evaluation methods like Net Present Value (NPV), Payback Period, and Program Evaluation and Review Technique (PERT) to choose the most viable projects and avoid unprofitable ventures.

BUSINESS DECISION
MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Plan for collection of primary data and secondary data........................................................3
1.2 Survey methodology and sampling frame.............................................................................3
1.3 Questionnaire for research....................................................................................................4
TASK 2............................................................................................................................................6
2.1 Information for decision making...........................................................................................6
2.2 Interpretation of results of statistical tools............................................................................7
2.3 Analysis of measure of dispersion........................................................................................8
2.4 Calculation of quartile, percentile and correlation................................................................8
TASK 3............................................................................................................................................9
3.1 Graphical representation of primary data..............................................................................9
3.2 Trend analysis chart............................................................................................................11
3.3 Covered in PPT...................................................................................................................12
3.4 Formal business report........................................................................................................12
TASK 4..........................................................................................................................................12
4.1 Information processing tools that are used in the business.................................................12
4.2 Network diagram.................................................................................................................13
4.3 Project evaluation technique...............................................................................................15
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18
INDEX OF TABLES
Table 1: Calculation of mean, median and mode............................................................................7
Table 2: Percentage change in value of variable.............................................................................8
Table 3: Calculation of standard deviation......................................................................................9
Table 4: Calculation of correlation..................................................................................................9
Table 5: Calculation of quartile and percentile.............................................................................10
Table 6: Table of activities............................................................................................................14
Table 7: Calculation of payback period method............................................................................17
Table 8: Calculation of ARR.........................................................................................................17

Table 9: Calculation of net present value......................................................................................18
Table 10: Calculation of IRR.........................................................................................................18
ILLUSTRATION INDEX
Illustration 1: People opinion on hike in price and its impact on their visits in restaurant............11
Illustration 2: People preference on different type of restaurants..................................................12
Illustration 3: Trend analysis for Aqua food..................................................................................12
Illustration 4: GANTT chart..........................................................................................................15
Illustration 5: Network diagram.....................................................................................................15

INTRODUCTION
In today era, business condition's are very complex and it is very difficult to take
decisions. Managers are using facts and figures to analyses firm performance and to make sound
business decisions. In this regard they use statistical tools and in this report some of these tools
are applied on firm cash flows. In this report mean, median, mode, standard deviation and
correlation are applied on sales figures in order to analyze same from different sides. In the
middle part of report charting of collected primary data is done and their results are interpreted.
At end of the report, project evaluation techniques are applied and best project is selected for the
firm.
TASK 1
1.1 Plan for collection of primary data and secondary data
In order to conduct research it is necessary to collect primary and secondary data.
Primary data refers to the facts and figures that are never published in any reading materiel and
collected for the first time by the research through field work. Secondary data is a set of facts and
figures that were already published in any publication and collected by other person. It is
necessary to collect both type of data because both helps researcher in conducting research in
better (Silverman, 2010). Before conducting a research it is imperative to determine a direction
in which research must be carried out. For this researcher needs to understand past and current
scenario related to the research topic. If one will collect information related to past then he will
comprehend past condition's related to the research topic and will come to know about the past
trends. By comparing past trends with current situation researcher easily identify the direction in
which he must conduct research. In order to conduct this research secondary data will be
collected from books, journals and magazines etc (Kazdin, 2011). For collecting primary data
questionnaire will be distributed among 60 respondents that resides in different areas of London
and are different from each other on the basis of demographic features.
1.2 Survey methodology and sampling frame
In order to do this research data will be collected by using specific survey methodology
method. There are various methods of sampling and some of them are as follows:- Simple random sampling- This is a specific sampling method and under this all sample
unit are taken from the population on random basis. This sampling method is employed

in the research when there is no specific parameter that needs to be considered while
selecting sample units from sample. Stratified random sampling- This is different sampling method and under this entire
population is divided in to several parts (De Vos and et.al, 2011). From these parts which
are also known as strata sample units are taken by the researcher. This method is suitable
for the research because in order to understand consumer behavior of the people it is
necessary to collect data from different type of people. Hence, this sampling method is
appropriate for research. Cluster sampling- In this sampling method entire geographical area is divided in to
various parts and from these parts sample units are taken by the researcher (Brennan and
et.al, 2013). This is commonly used method in government data collection projects.
 Convenience sampling- This is unique sampling method in which researcher according
to his convenience take sample units from the population. It can be said that this method
and simple random sampling technique are highly similar to each other.
1.3 Questionnaire for research
Name:
Age:
 20-25 age
 26-35 age
 36-45 age
 Above 45
Gender
 Male
 Female
 Transgender
Marital status
 Married
 Unmarried
 Divorced
What is your income level?
 600-1600

 1700-2800
 2900-3500
 3600- 4000
Which of below given factors you think play decisive role in your purchase decision in the
restaurant?
 Quality
 Price
 Both
Do you agree with the fact that there is high relationship between income level and people
pricing preference.
 Strongly agree
 Agree
 Somewhat agree
 Disagree
 Strongly disagree
How many times do you visit Aqua food restaurant in a year?
 5-10times
 10-20 times
 20-25 times
 More than 25 times
If Aqua food restaurant hike its edible items price then you will visit mentioned restaurant?
 Strongly agree
 Agree
 Somewhat agree
 Disagree
 Strongly disagree
In which type of restaurant you usually for go for taking lunch or dinner?
 Traditional
 Homey
 Modern

Which kind of dining Rooms you usually prefer in restaurants?”
 Formal dining
 Relaxed environment
 Private rooms
What sort pf below given cuisine you often prefer?
 Asian
 French
 Indian
 European
 Chinese
 Other
Your feedback
_______________
TASK 2
2.1 Information for decision making
Table 1: Calculation of mean, median and mode
Sales
1 50000
2 53000
3 55000
4 60000
5 65000
Mean 56600
Median 55000
Mode #VALUE! Mean- It refers to average value of the specific variable. If current value of the variable is
above mean value then it can be assumed that variable is giving good or bad
performance. Interpretation of variable performance on the basis of mean value depend
on the variable (Devore, 2015). If in case of sales current value of variable is above mean
value then it can be said that firm performance is good. But if current value of loss is

above mean value then it can not be said that firm perform well. Hence, with change in
variable interpretation also get changed if present figure of variable is above mean value. Median- Median is a statistical tool that divide entire data in to two equal parts. This tool
helps in evaluating trends of values of variable if data set is huge in nature (Liptser and
Shiryaev, 2013). There may be different trends in values of specific variable above and
below median value. Hence, it is very important statistical tool that is used by the
managers.
 Mode- It is a tool that identify the value that often repeated in the data set (Benjamin and
Cornell, 2014). If there is no value of mode then it means that none of value in the data
set is repeated.
2.2 Interpretation of results of statistical tools
Mean- Average or mean value of data set is 56,600 and current value of variable is 65000. It can
be clearly seen that average value of the variable is below present figure of the variable. It can be
said that Aqua food give a good performance in its business because current sales value is above
average value and values of sales is increasing consistently. This proves that firm is giving
elegant performance in the industry.
Median- Value of median is dividing entire data in to two equal parts. In table given below data
is analyzed in proper way.
Table 2: Percentage change in value of variable
Sales
1 50000
2 53000 6.00%
3 55000 3.77%
4 60000 9.09%
5 65000 8.33%
Here, median value is 55,000 and this value is dividing data in to equal parts. Up to this median
value it can be seen that sales growth rate is declining but after median value sales growth rate
accelerated to 9% from 3%. hence, it can be said that firm is giving excellent performance in its
business.

Mode- Value of mode is zero which means that none of value in data set is repeated. Figure of
sales is increasing regularly and it can be said that firm is giving excellent performance.
2.3 Analysis of measure of dispersion
Table 3: Calculation of standard deviation
Sales
1 50000
2 53000
3 55000
4 60000
5 65000
Standard deviation 5941
Interpretation
Standard deviation is a statistical tool that is used to identify the gap between current
values of variable and average value. More and more will be gap between both values
performance of variable can be considered good or bad (Blake and Isard, 2012). Standard
deviation of the sales is positive which means that sales of the firm is increased relative to mean
value by higher number. Hence, it can be said firm gives a good performance in its business.
This is a very important statistical tool because it indicate the extent to which perform is
performing well or worst relative to its average value of specific variable. If value of standard
deviation will decline then it means that gap between current sales and average sales is reduced.
This means that contraction is happening in sales of the firm. Thus, it is very important statistical
tool that is used by the business firms.
2.4 Calculation of quartile, percentile and correlation
Table 4: Calculation of correlation
Sales Profit
1 50000 5000
2 53000 5300
3 55000 5500
4 60000 6000

5 65000 6500
Correlation 1
Interpretation
Correlation is a important statistical tool that is used by the business firms. This tool is
used to measure relationship between two variables. Value of correlation remain in range of -1,0
and +1. If value of correlation is +1 then it means that there is very high correlation between two
variables and with change in one variable equal change will be observed in other variable (Bland,
2015). If value of correlation is zero then it means that there is no relationship between two
variables and both are independent in terms of their impact on each other. If value of correlation
is -1 then it means that that there is relationship between both variables and both are moving in
inverse direction. Here, value of correlation is one and it means sales and profit of the firm are
perfectly correlated with each other. If sales will be changed by 20% then profit will also
changed by 20%.
Table 5: Calculation of quartile and percentile
Sales
1 50000
2 53000
3 55000
4 60000
5 65000
Q1 53000
Q2 55000
Q3 60000
Interpretation
Quartile and percentile both are same things and only way of calculation is different in
case of both statistical tool (Benjamin and Cornell, 2014). These tools divide entire data in to
four equal parts. In percentile 25%, 50% and 75% value of the data set is identified. Hence, like
median both quartile and percentile help in analyzing figures in proper way.

TASK 3
3.1 Graphical representation of primary data
If Aqua food restaurant hike its edible items price then you will visit mentioned restaurant?
Strongly agree 5
Agree 4
Somewhat agree 2
Disagree 10
Strongly disagree 39
Interpretation
Most of the respondents state that if firm will elevate its commodity price then people do
not prefer to to arrive its restaurant for taking lunch. Majority of respondents said that they are to
large extent not agree with the fact that in case firm elevate its edible items price then in that case
also they would prefer visit its restaurant. Few respondents were not agree with statements hat
was asked to them and only 2 were somewhat agree with the given statement. Some sample units
were agree with the asked statement. Thus, it is concluded that facts show that firm can not
increase its product value.
In which type of restaurant you usually for go for taking lunch or dinner?
Traditional 10
Homey 20
Modern 30
Strongly agree
Agree
Somewhat agree
Disagree
Strongly disagree
0
10
20
30
40
Column C
Illustration 1: People opinion on hike in price and its impact on their visits in restaurant

Interpretation
When inquiry is done about people priority towards specific type of restaurant it is
identified that they like to visit modern restaurant in comparison to other sort of restaurant. At
least 50% of respondents like to visit modern restaurant. On other hand, only few respondents
like to take lunch at homey restaurants. Only 10 respondents make it clear that almost they like
to go in traditional restaurant to take dinner.
3.2 Trend analysis chart
1 2 3 4 5
0
10000
20000
30000
40000
50000
60000
70000
Column C
Linear (Column C)
Illustration 3: Trend analysis for Aqua food
10
20
30 Traditional
Homey
Modern
Illustration 2: People preference on different type of restaurants

Interpretation
From chart it can be observed that sales of the firm is increasing at rapid rate and in
future also same trend will remain continue. In chart line that is making prediction is going in
upper direction which is reflecting that in upcoming years sales of the firm will elevate by good
percentage. There are some limitations of this technique and due to this reason firm can not make
its business decisions entirely on the basis of results of this method. Changes that may occur in
the business environment can not be predicted so easily by the firm managers. Managers needs to
make forecast about likely movement that may occur in the internal and external components of
the business environment. The main limitation of trend analysis is that is makes use of past year
data for making prediction for the changes that may happen in the business environment. Always
whatever happened in the past can not repeatedly occur in the future time period. So, firm must
use simulation method for making accurate prediction for the business.
3.3 Covered in PPT
3.4 Formal business report
To
The Directors of Aqua food
Date: 11h July 2016
Market research is carried out in order to identify hidden opportunities in the London market
and to prepare business strategy to capitalize available opportunity. Both sort of data which are
primary and secondary are collected by the researcher in order to conduct research in legitimate
way. Secondary data is collected from journals and books as well as newspapers. On other
hand, primary data is collected by distributing questionnaire among the 60 people that lives in
different borough of London. It is find on data analysis that lots of business opportunity are
available in the market and it is right time to enter in the market. Customers in the London are
giving due importance to product price and due to this reason firm can not take risk of making
hike in its product price. In case if firm will elevate its edible items price then its market share
may reduce to large extent in the London market. Hence, firm needs to carefully make its
business decisions.

TASK 4
4.1 Information processing tools that are used in the business
Following are the information processing tools that can be used in the business. Management information system- It is one of the most important processing system that
are used by the most of the business firms. This is because it is system which can process
single set of data which is huge in size in short time period in accurate manner. Report is
prepared by using management information system and by using same business decisions
are made by the firm managers (Ian, 2010). Thus, it is an information system that play a
significant role in growth of the firm. Decision support system- Firm top managers like CEO, CIO and CFO commonly used
decision support system in an organization. There are some of the similarities in the MIS
and DIS like large size data can be stored in the both information system. MIS and DIS
generate report which are used by the managers for making there business decisions.
Simulation is one of the specific feature of the decision support system which is not
available in the management information system (Venkatesh, Thong and Xu, 2012).
Thus, both information system are used at large scale in an organization.
 Transaction processing system- It is also one of the most important information system
in which everyday business transactions values are entered on daily basis. Lower level
managers entered expenses related data in the mentioned information system and
generate reports. These reports are used for making cost curtailment and control decisions
related to the business firm.
4.2 Network diagram
Table 6: Table of activities
Name Duration Start Finish Predecessors Resource Names
Preliminary
design 10 days 06-04-2016 19-04-2016 3
Market research 9 days 20-04-2016 02-05-2016 1 2

Purchasing
machines 5 days 03-05-2016 09-05-2016 2 2
Preparing
sample units 6 days 20-04-2016 27-04-2016 1 5
Prepare
marketing
material
4 days 20-04-2016 25-04-2016 1 3
Costing 3 days 10-05-2016 12-05-2016 3 2
Product testing 4 days 28-04-2016 03-05-2016 4 5
Pilot survey 5 days 03-05-2016 09-05-2016 2,5 4
Pricing
estimates 5 days 10-05-2016 16-05-2016 8 1
Final report 7 days 17-05-2016 25-05-2016 6,7,9 2

Illustration 4: GANTT chart
Illustration 5: Network diagram

It is a method that help managers in determining the chronological order in which
activities must be performed in order to complete project at reasonable cost (Program and
evaluation and review technique, 2016). By using this method managers ensures that project will
be completed on time and at appropriate cost. For this project sequence of the activities is
1+2+3+6+8+10= 63 days. Firm will need to spend 63 days to complete the project.
4.3 Project evaluation technique
Payback period method
Table 7: Calculation of payback period method
Project A Project B
Initial
investment -190000 -200000
1 70000 -120000 80000 -120000
2 75000 -45000 83000 -37000
3 80000 35000 87000 50000
4 85000 120000 93000 143000
5 90000 210000 95000 238000
Interpretation
It is one of the most commonly used project evaluation method because it indicate the
years that will be taken by the project to cover investment amount (Payback method, 2016). Both
projects will take two year time period to cover cost of the project. Payback period for both
project is equal and due to this reason none of project can be assumed viable on the basis if this
parameter.
Average rate of return
Table 8: Calculation of ARR
Project A Project B
Initial
investment 190000 200000
1 70000 80000
2 75000 83000

3 80000 87000
4 85000 93000
5 90000 95000
Total 400000 438000
Average 80000 87600
ARR 42.11% 43.80%
Interpretation
After payback period it is second most commonly used method because it reflect mean
value of return percentage that can be earned on the specific project. From table it can be seen
that mean return of project A is 42.11%. Whereas, mean return of project B is 43.80%. Due to
higher percentage project B is selected for the firm on the basis of this parameter.
Net present value method
Table 9: Calculation of net present value
Project A PV @12% Present value Project B PV @10%
Present
value
Initial
investment 190000 200000
1 70000 0.909 63636 80000 0.909 72727
2 75000 0.826 61983 83000 0.826 68595
3 80000 0.751 60105 87000 0.751 65364
4 85000 0.683 58056 93000 0.683 63520
5 90000 0.621 55883 95000 0.621 58988
Total 299664 329194
NPV 109664 129194
Interpretation
Net present value refers to the residual value of the project that comes in existence after
all expenses are deducted from the cash flows (Net present value, 2016). It can be observed that
net present value of project B is much higher then project A. Hence, former project is viable for
the firm then latter project.

Internal rate of return
Table 10: Calculation of IRR
Project A Project B
Initial
investment -190000 -200000
1 70000 80000
2 75000 83000
3 80000 87000
4 85000 93000
5 90000 95000
IRR 29.64% 32.11%
Interpretation
It is one of the most important tool of project evaluation because it reflects the realistic
percentage return that can be earned on specific project. It can be seen in the above table that
internal rate of return of project B is much higher relative to project A. Hence, again former
project is assumed viable for the firm then latter project.
It is concluded on the basis of results generated by all project evaluation methods that
project B is profitable then project A.
CONCLUSION
On the basis of above discussion it is concluded that managers must use statistical tools
in order to evaluate firm performance from various sides. On the basis of input provided by these
statistical tools sound business decisions can be made by the managers. It is also concluded that
managers must apply project evaluation method in order to select most viable project for the
firm. If same will be selected on random basis then wrong project may be selected by the
managers and it may prove unprofitable for the firm.

REFERENCES
Books & journal
Benjamin, J.R. and Cornell, C.A., 2014. Probability, statistics, and decision for civil engineers.
Courier Corporation.
Blake, A. and Isard, M., 2012. Active contours: the application of techniques from graphics,
vision, control theory and statistics to visual tracking of shapes in motion. Springer
Science & Business Media.
Bland, M., 2015. An introduction to medical statistics. OUP Oxford.
Brennan, C.W. and et.al., 2013. The somatic genomic landscape of glioblastoma. Cell, 155(2),
pp.462-477.
De Vos, A.S. and et.al, 2011. Research at grass roots: A primer for the social science and
human professions. Van Schaik Publishers.
Devore, J., 2015. Probability and Statistics for Engineering and the Sciences. Cengage Learning.
Venkatesh, V., Thong, J.Y. and Xu, X., 2012. Consumer acceptance and use of information
technology: extending the unified theory of acceptance and use of technology. MIS
quarterly. 36(1). pp.157-178.
Online
Net present value, 2016. [Online]. Available through:
<http://www.financeformulas.net/Net_Present_Value.html>. [Accessed on 6th April
2016].
Payback method, 2016. [Online]. Available through: <http://www.accountingtools.com/payback-
period-formula>. [Accessed on 6th April 2016].
Program and evaluation and review technique, 2016. [Online]. Available through: <
http://www.inc.com/bill-murphy-jr/apple-facebook-snapchat-and-tesla-prove-it-people-
want-what-they-cant-have.html>. [Accessed on 6th April 2016].