Types, Importance, and Limitations of Statistics

Meaning of Statistics

Statistics is a mathematics discipline which involves collection of data, organizing, analyzing, interpreting and presenting it fairly for drawing conclusions. It is the one which uses various quantitative tools for gathering and evaluating large sets of data. Statistics is an efficient tool which helps business in making efficient and well-informed decisions. It is used by various fields such as economics, science, medicine, marketing, psychology and politics.

Statistics helps in converting the acquired raw data into key information which is helpful for developing better understanding and sound decision making. Business with the application of statistical tools is able to make better plan by making accurate assumptions and predictions. They are able to handle future uncertainties in a better way by predicting cyclical and general economic fluctuations. Statistics is classified into two categories that are descriptive and inferential statistics.

Types of Statistics

Descriptive Statistics

Descriptive statistics is the first stage in statistical analysis. It is concerned with acquiring data and presenting it. Descriptive statistics involves use of charts, tables, graphs or other statistical tools for summarizing given set of data. Various calculations included under this are measures of central tendency and variability.

Inferential Statistics

It is one which checks the validity of generalizations made by descriptive statistics. Inferential statistics enables the statisticians to draw conclusion, make decisions and prediction by evaluating the collected information. It is used for reading the data and making right estimates from sample of information collected. This uses various techniques such as regression analysis, correlation analysis, analysis of variance and co-variance.

Importance of Statistics

Business

Statistics plays an efficient role in successful functioning of business enterprises. It supports business in taking right decision at right time by proper estimation of cost, demand, sales and price.  They are able to efficiently plan their production activities in accordance with the needs of market needs.

Accounting and Auditing

Both accounting and auditing uses statistics techniques for their successful working. Sampling method are used in auditing process wherein the auditor selects sample size and read it for detecting out the errors. Whereas in accounting, the concept of approximation is used for making various decisions. Currents assets valuation is made in accordance with its current value or purchasing power of money.  

Banking

It has a lead role in banking sector. Banks earns mainly by lending funds to public out of the deposits received by them.  Money deposited by the public is not withdrawn at the same time. Banking firms uses the concept of probability to decide the frequency of deposits and withdrawals in a day.

Research Work

Researchers uses various statistical tools for conducting their research work. They use statistical methods to study the effect of a particular variable on a certain problem under different conditions. Statistics skills and knowledge are termed as basic to activities of research programs.

Trade

Statistics supports the trading activities by assisting traders in taking sound decisions. Business is always surrounded by a lot of future uncertainties and risk. Statistical methods enable in successful forecast of future activities and anticipate demand and supply aspects.

Natural and Social Science

Different natural and social science branches are dependent upon statistics. They use statistical tools and methods for conducting the experiments and testing their results.

Limitations of Statistics

Ignores qualitative aspects

Statistics considers only the quantitative aspects for analysis purposes. It takes into account those units which can be measured or numerically expressed. Qualitative aspects like intelligence, efficiency, poverty and honestly are ignored and not studied under it.

No exact statistical laws

There are no exact laws for statistics unlike physical sciences and mathematics. Statistical laws are only the appropriations and conclusions drawn by statistical methods are true only on an average under particular conditions.

Requires statistics expert

Another major drawback is that it requires an expert possessing high knowledge of statistics for using statistical methods. Employing inefficient or untrained person may be quite dangerous and lead to false conclusions.

Not applicable to heterogeneous data

Statistics tools evaluate and analyses only the homogeneous set of data. It cannot be used to study and find relationship between varied patterns of data.

Reveal only average results

Results yielded by statistical methods are not universally true and only provide the average behavior. They came out to be true on an average under certain conditions.