2-4-2-Understanding-Business-Performance

Using quantitative data to make business decisions

• Quantitative data is statistical numeric data that can be used to support decision making

  • Quantitative data needs to be accurate and interpreted correctly if it is to be useful

• Quantitative data may be collected from primary or secondary sources

  • Primary data is collected first hand for a specific purpose

  • Secondary data has been collected by someone else

• Sources of quantitative data include

  • graphs and charts

  • financial data

  • marketing data

  • tables or infographics

Information from graphs and charts

• Information presented in graphs and charts is often easy to understand because it is presented visually

Bar Chart

• This bar graph provides a clear picture of umbrella sales between January and April and allows a manager to compare sales between each month

  

Pie Chart

• This pie chart breaks down all umbrella sales into those achieved by different models

• It shows clearly that more than half of sales were ‘Ultra’ umbrellas

Scatter Graph

• Scatter graphs allow relationships between two variables to be identified

• The scatter graph below shows that there is a clear relationship (a positive correlation) between the temperature and sales of barbecues

  • As the temperature increases, sales of barbecues increase

• A positive correlation exists when an increase in one variable leads to an increase in another

  • On a scatter graph, an upward trend on the plots can be identified

• A negative correlation exists when an increase in one variable leads to a decrease in another

  • On a scatter graph, a downwards trend on the plots can be identified

• Correlations may be strong or weak

  • A strong correlation allows a line of best fit to be applied with ease

  • Where a weak correlation exists it is difficult to identify a line of best fit

Financial Data

• Businesses can use a selection of internal and external financial data to support decision making including

  • Sales revenue

  • Profit

  • Costs 

  • Tax

  • Interest and exchange rates

  • Valuations of assets

  • Bank balances

• Companies need to send key financial data to Companies House each year whereas sole traders and partnerships may keep this information private

Marketing Data

• Marketing data is collected through primary and secondary market research, such as

  • Surveys

  • Focus groups

  • Observation

  • Customer feedback

  • Retail or online footfall

  • Government or trade publications

  • The media

• Marketing data can help business managers forecast sales and to make decisions about product development and promotional plans

Market Data

• Market data refers to the characteristics and performance of the market in which a business operates such as

  • Demographic data relates to the market’s population structure such as age, gender and income statistics

  • Market dimensions includes factors such as the size of the market, the market shares of key competitors, the rate of market growth and average prices across the market

  • Investment data relates to the prices of commodities (e.g. oil) as well as exchange rate data and stock market performance

• Market data can help a business identify and plan for new opportunities and spot external threats such as the increased power of a competitor

• It can also be used alongside other types of quantitative data to make investment decisions 

The use and limitations of financial information

• Businesses can use financial data in several ways

  • To identify trends and make calculations for comparison over time and with other businesses

  • To support an application for external finance such as a loan

  • To attract potential investors

  • To support spending decisions

• There is a range of limitations to the use of financial data in decision making

Limitations of financial data in decision-making