What is a Z-score?

A Z-score is indeed a standardized value that indicates how many standard deviations a data point is from the mean of its distribution. It serves as a crucial tool in statistics for comparing values from different data sets, allowing us to determine how unusual or typical a particular value is within a specific context. The calculation of a Z-score involves subtracting the mean from the value in question and then dividing by the standard deviation.

This concept is particularly useful in various applications such as hypothesis testing, confidence intervals, and identifying outliers in data. By converting raw scores into Z-scores, we can also make use of the standard normal distribution for probability calculations and decision-making in business and research contexts. This capacity to standardize data sets allows for easier comparison and interpretation.