Module 2: Business Decision Making

Techniques to effectively analyse data for business purposes - Using data

Using the data

It is important to use the results to draw valid conclusions. Sometimes further data will be needed to explain the results.

Measures of dispersion

The dispersion is how far, on average, values are from the mean.

Look at the following two sets of data.

Dataset A: 7, 3, 5, 5

Dataset B: 10,1, 2, 7

The mean for both sets is 5 (20÷4) but you can see that the numbers tend to be further from the mean in dataset B than in dataset A. You can measure this dispersion by using standard deviation.

Step 1

This can be done by subtracting all the numbers from the mean:

0, 0,-2, 2

5, -4, -3, 2

Step 2

These are then squared and totalled:

0,0,4,4 = 8

25,16, 9, 4 = 54

Step 3

Now the totals are divided by the number of values:

8 ÷ 4 = 2

54 ÷ 4 = 13.5

Step 4

And finally, it is necessary to calculate the square root:

𝟐‾√ = 𝟐 = 1.4
𝟏𝟑‾‾‾√.𝟓 = 𝟏𝟑.𝟓 = 3.7

Smaller numbers indicate that the data is, on average, closer to the mean while larger numbers indicate that the data is further away from the mean on average.

Data handling programs such as Excel have in-built functions for calculating the standard deviation of large datasets.