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Python Lesson 7 Python in Business Probability, Financial Fundamentals, and Data Analysis

Python Lesson

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Xuan Zheng Lim
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6 views

Python Lesson 7 Python in Business Probability, Financial Fundamentals, and Data Analysis

Python Lesson

Uploaded by

Xuan Zheng Lim
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Python in Business: Probability,

Financial Fundamentals, and


Data Analysis
Dr. Saima Nisar
PhD (IT), MS (IT), BBA (Hons.)
Learning Objectives:
By the end of this lecture, students will be able to:
 Understand the role and advantages of Python in business
analytics.
 Apply probability concepts in Python to simulate real-world
business scenarios.
 Calculate future and present values for investment planning.
 Visualize business data effectively with 2D and 3D graphs in
Python.
Introduction to Python in Business
• Python’s Role in Business: Python is a powerful tool for
analyzing and interpreting data in business and statistics,
providing valuable insights and predictions.

• Why Python?: Its efficiency, flexibility, and ease of use make


it ideal for handling data, performing calculations, and
generating graphs.

• Key Libraries: NumPy for mathematical operations, Pandas


for data manipulation, Matplotlib for visualizations, and SciPy
for statistics.
Probability in Business
• Probability is the measure of how likely it is that a
particular event will occur.

• In business, probability helps us to make decisions


under uncertain events, like predicting the likelihood
of a product's success or market trends.

• We use Python’s NumPy library to simulate


probability-based scenarios, like rolling a die to see
how often each face appears.
Probability in Business
Example:
• Simulating (pretend) a die roll to understand random outcomes.
• Simulating multiple trials gives a broader view of probability. In
business, this could relate to repeated customer purchases or
recurring transactions.

import numpy as np
# Simulate rolling a die
print("Rolling a die once:",np.random.randint(1, 7))
# Roll a die 10 times
few_rolls = np.random.randint(1, 7, size=10)
print("Rolling a die 10 times:", few_rolls)
Coin Flips and Binomial Distribution
Binomial Distribution represents the number of successes in a
fixed number of trials. In business, it’s used in quality control
(e.g., defective items in a batch)
• Using the SciPy library to simulate coin flips as a binomial
distribution.

from scipy.stats import binom


# Simulate a binomial distribution of 10 coin flips
n_flips = 10
p_success = 0.5 # 50% chance of heads
distribution = binom.pmf(range(n_flips + 1), n_flips, p_success)
plt.bar(range(n_flips + 1), distribution)
plt.xlabel("Number of Heads")
plt.ylabel("Probability")
plt.show()
Demand Forecasting Simulation
• Demand forecasting means predicting how many customers will buy
a product in the future. This is crucial for businesses to avoid
overstocking or running out of products.

• Predict demand over 30 days using random values.

• Visualize demand with a histogram to understand frequency.


demand = np.random.randint(20, 100, size=30)
import matplotlib.pyplot as plt
%matplotlib inline
plt.hist(demand, bins=10, edgecolor='black')
plt.title("Simulated Demand over 30 Days")
plt.xlabel("Demand")
plt.ylabel("Frequency")
plt.show()
Future & Present Values
Time Value of Money: Money now is more valuable than the same
amount in the future, due to potential interest or investment returns.

Future Value (FV) answers the question, “If I invest money now,
how much will it be worth in the future?”

Future Value (FV): The growth of an investment over time


Future Value Calculation in Python
• Calculate how an investment grows over time.
• Example: Investment of $1,000 at 10% for 10 years.

investment = 1000
interest_rate = 0.1
years = 10
future_value = (1 + interest_rate) ** years * investment
print(f"Future Value after {years} years: ${future_value:.2f}")
Present Values
Present Value (PV) tells us the worth of future cash flows
today, aiding in investment decisions.

Example in Business: Helps companies evaluate the


feasibility of projects by comparing the current worth of
future cash flows.

Present Value (PV): Today’s worth of a


future amount.
Present Value Calculation in Python
• Determine today’s worth of a future amount.
• Example: Calculate PV of the investment’s future worth.

present_value = future_value / (1 + interest_rate) ** years


print(f"Present Value of ${future_value:.2f} in {years} years: ${present_value:.2f}")
Present Value and Discounting Cash Flows

• Example in Business: Helps companies evaluate the


feasibility of projects by comparing the current worth of future
cash flows..

future_cash = 2593.74
years = 10
discount_rate = 0.05
present_value = future_cash / (1 + discount_rate)**years
print("Present Value:", present_value)
Three Dimensional Graphs
• 3D Graphing: 3D graphs allow visualization across multiple
variables. In business, we can plot factors like sales volume
vs. product type vs. customer segment.
• Use Matplotlib's 3D plotting features to visualize relationships
between multiple variable

from mpl_toolkits.mplot3d import Axes3D


fig = plt.figure()
ax = fig.add_subplot(111, projection='3d')
people = np.arange(1, 11)
rootbeers = np.arange(0, 20)
people, rootbeers = np.meshgrid(people, rootbeers)
total_cost = 80 * people + 10 * rootbeers + 40
ax.plot_surface(people, rootbeers, total_cost)
ax.set_xlabel("People")
ax.set_ylabel("Rootbeers")
ax.set_zlabel("Total Cost")
plt.show()
Data Visualization and High-Quality Graphing Techniques

Data visualization and high-quality graphing techniques are


essential in business analytics. They transform raw data into
visual representations, making complex data sets easier to
interpret, analyze, and communicate.

High-quality visuals reduce the chances of misinterpretation.


Businesses use data visualizations to make data-driven
decisions.

Example: Sales trends, customer segmentation, and


forecasting models are all represented in charts or graphs.
Data Visualization and High-Quality Graphing
Techniques

import matplotlib.pyplot as plt


years = np.linspace(0, 10, 100)
interest_rates = [0, 5, 10, 15, 20]
for rate in interest_rates:
investment = (1 + rate/100) ** years
plt.plot(years, investment, label=f'Rate: {rate}%')
plt.xlabel("Years")
plt.ylabel("Investment Value")
plt.legend()
plt.grid(True)
plt.title("Investment Growth over Time")
plt.show()
Thank you

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