Hi, my name is Grant Hobson. I work as a finance analyst, and today I'm going to talk you through some business math calculations and ratios. How to calculate Z score. Z score basically shows us how far an observation or a piece of data is away from the mean, from the bigger set of data, so it allows comparisons. And when doing research and like a normal set of distributed data, it just allows us to pick out anomalies and different sets in that data and see the probability another similar score arising and we'll talk through that in the calculation to see how it works. So let's calculate the z score, and we use the formula shown above. So it's simply as piece of raw data minus the mean over the bigger set of data that was taken from divided by the standard deviation of that data set. So for example, if we take data and that could be petrol prices are, for a period of month let's just say 50 pounds, fill up 48 pounds in month 2, 47 pounds in month 3, 49 pounds in month 4, 53 in month 5, and 57 pounds in month 6. So it's quite a bit of variation from the outside of that data and what the prices were. So what we need to do is get the formula complete. Let's first calculate the standard deviation. So what I do to do this is you can use the Excel function to calculate the deviation to. If you don't know how to do that, it'll be worth just looking at the video we've got online of how to calculate standard deviation in Excel or alternatively, you can calculate that manually and then you can get that formula from the textbook. The standard deviation for this set of data is at 3.72. So then we want to get the other variable in the calculation which is the mean. So we simply take in the sum of the data which is 304 and then we're going to divide it by the number 6. So the sum of the data divided by the number of data pieces that we have, 6 sets of data, 6 months, 50.67. So now what we want to do is we want to know the z score of one of these sets of data. So we'll take the 5th one, 53. So basically if we're now at this raw data, we've got the calculation of the z score which is 53 minus 50.67 which is your mean divided by standard deviation of 3.72, and that works our 0.63. So then take this into consideration with the standard normal distribution table and then you can go on analyzing your data. .

#### Discuss

0 comments characters remainingSubmit