What is 'z test' in business adminstration?
Question:
Answer:
The Z-test is a statistical test used in inference which determines if the difference between a sample mean and the population mean is large enough to be statistically significant.
In order for the Z-test to be reliable, certain conditions must be met. The most important is that since the Z-test uses the population mean and population standard deviation, these must be known. The sample must be a simple random sample of the population. If the sample came from a different sampling method, a different formula must be used. It must also be known that the population varies normally (i.e., the sampling distribution of the probabilities of possible values fits a standard normal curve). If it is not known that the population varies normally, it suffices to have a sufficiently large sample, generally agreed to be ≥ 30 or 40.
In actuality, knowing the true σ of a population is unrealistic except for cases such as standardized testing in which the entire population is known. In cases where it is impossible to measure every member of a population it is more realistic to use a t-test, which uses the standard error obtained from the sample along with the t-distribution.
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