Quantitative Methods - Edinburgh Business School

1 QM-A2-engb 1/2012 (1022) Quantitative Methods Professor David Targett This course text is part of the learning content for this Edinburgh Business School course. In addition to this printed course text, you should also have access to the course website in this subject, which will provide you with more learning content, the Profiler software and past examination questions and answers. The content of this course text is updated from time to time, and all changes are reflected in the version of the text that appears on the accompanying website at Most updates are minor, and examination questions will avoid any new or significantly altered material for two years following publication of the relevant material on the website.

2 You can check the version of the course text via the version release number to be found on the front page of the text, and compare this to the version number of the latest PDF version of the text on the website. If you are studying this course as part of a tutored programme, you should contact your Centre for further information on any changes. Full terms and conditions that apply to students on any of the Edinburgh Business School courses are available on the website , and should have been notified to you either by Edinburgh Business School or by the centre or regional partner through whom you purchased your course. If this is not the case, please contact Edinburgh Business School at the address below: Edinburgh Business School Heriot-Watt University Edinburgh EH14 4AS United Kingdom Tel + 44 (0) 131 451 3090 Fax + 44 (0) 131 451 3002 Email Website Quantitative Methods The Quantitative Methods programme is written by David Targett, Professor of Information Systems at the School of management , University of Bath and formerly Senior Lecturer in Decision Sciences at the London Business School .

3 Professor Targett has many years experience teaching executives to add numeracy to their list of management skills and become balanced decision makers. His style is based on demystifying complex techniques and demonstrating clearly their practical relevance as well as their shortcomings. His books, including Coping with Numbers and The Economist Guide to Business Numeracy, have stressed communication rather than technical rigour and have sold throughout the world. He has written over fifty case studies which confirm the increasing integration of Quantitative Methods with other management topics. The cases cover a variety of industries, illustrating the changing nature of Quantitative Methods and the growing impact it is having on decision makers in the Information Technology age.

4 They also demonstrate Professor Targett s wide practical experience in international organisations in both public and private sectors. One of his many articles, a study on the provision of management information, won the Pergamon Prize in 1986. He was part of the team that designed London Business School s highly successful part-time MBA Programme of which he was the Director from 1985 to 1988. During this time he extended the international focus of the teaching by leading pioneering study groups to Hong Kong, Singapore and the United States of America. He has taught on all major programmes at the London Business School and has developed and run management education courses involving scores of major companies including: British Rail Citicorp Marks and Spencer Shell First Published in Great Britain in 1990.

5 David Targett 1990, 2000, 2001 The rights of Professor David Targett to be identified as Author of this Work has been asserted in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publishers. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior consent of the Publishers. Quantitative Methods Edinburgh Business School v Contents PART 1 INTRODUCTION AND BACKGROUND Module 1 Introducing Statistics.

6 Some Simple Uses and Misuses 1/1 Introduction 1/1 Probability 1/3 Discrete Statistical Distributions 1/5 Continuous Statistical Distributions 1/8 Standard Distributions 1/11 Wrong Use of Statistics 1/15 How to Spot Statistical Errors 1/19 Concluding Remarks 1/20 Review Questions 1/22 Case Study : Airline Ticketing 1/24 Case Study : JP Carruthers Co. 1/24 Case Study : Newspaper Letters 1/28 Module 2 Basic Mathematics: School Mathematics Applied to management 2/1 Introduction 2/1 Graphical Representation 2/2 Manipulation of Equations 2/7 Linear Functions 2/10 Simultaneous Equations 2/13 Exponential Functions 2/17 Review Questions 2/24 Case Study : Algebraic Formulation 2/27 Case Study : CNX Armaments Co.

7 2/28 Case Study : Bonzo Corporation 2/28 Case Study : Woof Dog Food 2/28 PART 2 HANDLING NUMBERS Module 3 Data Communication 3/1 Introduction 3/1 Rules for Data Presentation 3/3 The Special Case of Accounting Data 3/11 Communicating Data through Graphs 3/15 Concluding Remarks 3/20 Review Questions 3/21 Contents vi Edinburgh Business School Quantitative MethodsCase Study : Local Government Performance Measures 3/22 Case Study : Multinational Company s Profit and Loss Account 3/23 Case Study : Country GDPs 3/24 Case Study : Energy Efficiency 3/24 Module 4 Data Analysis 4/1 Introduction 4/1 management Problems in Data Analysis 4/2 Guidelines for Data Analysis 4/6 Concluding Remarks 4/15 Review Questions 4/16 Case Study : Motoring Correspondent 4/17 Case Study : Geographical Accounts 4/18 Case Study.

8 Wages Project 4/19 Module 5 Summary Measures 5/1 Introduction 5/1 Usefulness of the Measures 5/2 Measures of Location 5/5 Measures of Scatter 5/13 Other Summary Measures 5/19 Dealing with Outliers 5/20 Indices 5/21 Concluding Remarks 5/28 Review Questions 5/28 Case Study : Light Bulb Testing 5/32 Case Study : Smith s Expense Account 5/32 Case Study : Monthly Employment Statistics 5/32 Case Study : Commuting Distances 5/33 Case Study : Petroleum Products 5/33 Module 6 Sampling Methods 6/1 Introduction 6/1 Applications of Sampling 6/3 The Ideas behind Sampling 6/3 Random Sampling Methods 6/4 Judgement Sampling 6/9 The Accuracy of Samples 6/10 Typical Difficulties in Sampling 6/12 Contents Quantitative Methods Edinburgh Business School vii What Sample Size?

9 6/13 Concluding Remarks 6/14 Review Questions 6/15 Case Study : Business School Alumni 6/17 Case Study : Clearing Bank 6/18 PART 3 STATISTICAL Methods Module 7 Distributions 7/1 Introduction 7/1 Observed Distributions 7/2 Probability Concepts 7/8 Standard Distributions 7/12 Binomial Distribution 7/13 The Normal Distribution 7/18 Concluding Remarks

10 7/25 Review Questions 7/27 Case Study : Examination Grades 7/29 Case Study : Car Components 7/29 Case Study : Credit Card Accounts 7/29 Case Study : Breakfast Cereals 7/30 Module 8 Statistical Inference 8/1 Introduction 8/1 Applications of Statistical Inference 8/2 Confidence Levels 8/2 Sampling Distribution of the Mean 8/3 Estimation 8/6 Basic Significance Tests 8/8 More Significance Tests 8/17 Reservations about the Use of Significance Tests 8/22 Concluding Remarks 8/23 Review Questions 8/25 Case Study : Food Store 8/27 Case Study.