Understanding Business Performance (Edexcel GCSE Business)
Revision Note
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 & 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 on the right 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
Examiner Tips and Tricks
You are often required to interpret quantitative data in exam questions so ensure that you practise these skills and understand how data can be used to inform decision making and provide justification for decisions.
Make sure that you also consider relevant qualitative factors, though - especially where a decision is not clear-cut.
Some powerful qualitative factors can include the wishes of the business leader, the impact on stakeholders and whether the business has aims that are not purely financial.
The Use & Limitations of Financial Information to Businesses
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 to the use of Financial Data in Decision-making:
Limitation | Explanation |
---|---|
Different interpretations of data |
|
Data becomes out of date quickly |
|
Qualitative factors are ignored |
|
You've read 0 of your 10 free revision notes
Unlock more, it's free!
Did this page help you?