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What Is Business Statistical Analysis?

Jim B.
Jim B.

A business statistical analysis is a process by which a company attempts to use statistics gathered from operational data and financial information as a basis for making business decisions. Such an analysis may also be performed on a business by an outside source, like an investor compiling information on a stock. Performing a business statistical analysis requires inputting information that is not only accurate but also pertinent to the decision-making process. One primary example of business statistics is a financial ratio, which takes two pieces of financial information to create a ratio that is useful for comparison between companies.

There are many people who feel that there should be no decisions made in the business world without firm statistical foundations backing them up. While statistics, especially the most complicated ones, can be daunting to some, they are at the heart of many of the decisions made by leading businesses everywhere. A business statistical analysis can be an extremely detailed overview of a company as a whole or it can simply focus on a single aspect of operations, but it must shed some light on the company's strengths and weaknesses.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

The main advantage of a business statistical analysis is that it can take any guessing out of the decision-making process. Statistics can be used as the rationale for decisions that need to be made. If no relevant statistics exist, they can be created through statistical experiments. Statistical backing can be used for everything from creating products to deciding on investments.

Of course, care must be taken so that a business statistical analysis does not create incorrect results. The key to avoiding this unfortunate event is making sure that the information that is put into statistical models is correct. There is an old adage in statistical circles that, paraphrased, says that if a someone puts bad information in, he or she will receive bad information out. Not only should the input be correct, it should be germane to the decision being made.

Among the many statistics available for a business statistical analysis, financial ratios are among the most popular. A ratio is created by taking two pieces of financial information and dividing one into the other. The resulting ratio illuminates some aspect of a company's business operations. These ratios can then be compared to those of other companies in similar industries to show where a firm is strong and where it needs improvement to stay competitive.

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