Explain the use of statistics in business planning.

Statistics and business planning:Statistical methods play a vital role in major business activities. Commerce and industry in the modern age require a great deal of planning and forecasting of various kinds of data. Statistics come to the aid of the business planner in many ways:

(a) The producer or the manufacturer has to estimate demand for his goods in the immediate as well as distant future. This is done by market research for which all the steps to statistical method have to be followed. The cost accountant uses statistical tools to help the producer to fix the prices of various commodities.

(b) The trader-wholesaler or retailer depends heavily on methods of statistical analysis for finding out solution to problems regarding buying and selling activities.

(c) Insurance companies function on the basis of estimations of mortality rates, that is, life expectations and on this basis calculation of insurance premiums is done. Accordingly they decide what proportions of their capital can be invested and what proportions kept ready for payments of matured policies.

(d) Other public utility bodies, such as the road transport companies, the railways, advertising concerns, warehouses etc., which contribute to commerce in a significant way, also make use of statistical data for their efficient functioning. For instance, they have to determine the extent of demand that would be made on their services and the rates they might fix for the same. In fact no modern organization can survive and efficiently function without analysis of the complex factors that influence commerce, and for systematic business analysis statistical tools are absolutely essential.