B4 Formats for Decision Making
Unit 7: Business Decision Making
Graphs are visual representations of data sets that effectively illustrate information, making it easier to understand and communicate. Different types of graphs can be used depending on the data that is being analysed.
Graphs are useful tools in business decision making as they can present complex information in a clear and easy to understand format. They can be used to quickly identify trends, compare data, make predictions and to communicate with a range of people involved in decision making.
Line graphs represent the relationship between two variables, the independent variable (X axis) and the dependent variable (Y axis), across a series of data points. Line graphs are commonly used to establish and compare trends in data.
Common uses of line graphs
Tracking sales figures over time, e.g. the product life cycle.
Comparing sales with competitors over time.
Monitoring website traffic over time.
A pie chart is a circular representation of percentage based data. The whole circle represents 100% with segments representing smaller percentages. This helps an audience to visualise the size of different segments in relation to each other.
Common uses of pie charts
Market share analysis, comparing the size of competitors in a market.
Sales composition, sales figures across different products in the portfolio.
Market research results.
A bar chart uses rectangular bars to display different categories of data. The length or height of each bar represents the size of that category. This method allows for easy comparisons between the size of different categories of data.
Common uses of bar charts
Sales figures of different products or in different regions.
Market research results.
Stock levels for inventory management.
A histogram is a type of graph that uses bars to represent ranges of data with each bar representing the frequency data within that range. They are used to illustrate the distribution of continuous numerical data.
Common uses for histograms
Comparing sales transactions across different price points.
Age distribution of customers.
Market research results.
Scatter Graphs and Linear Line Trends
Scatter (XY) graphs can be used to display two sets of data to see if there is a correlation between them.
When both variables increase, there is a positive correlation. An example of positive correlation could be rainfall and umbrella sales. When one variable increases and the other decreases, this is a negative correlation. An example of negative correlation could be rainfall and ice cream sales. When no relationship can be found between the two variables, there is no correlation.
A trend line can be drawn though the centre of the points to make the graph easier to interpret. This line can be extrapolated to predict future trends.