IMPORTANCE OF

BUSINESS
MATHEMATICS
Submitted By: Mohammad Qasim

Registration ID: BBA-172021

Course Mentor: Mr. Sabah Qaiser

PPage | 0
BUSINESS MATHEMATICS:
Mathematics is an important part of managing business.
Business and mathematics go hand in hand this is because
business deals with money and money encompasses
everything in itself. There is a need for everyone to manage
money as some point or the other to take decisions which
requires everyone to know mathematics. Business
mathematics is used by commercial enterprises to record and
manage business operations. Commercial organizations use
mathematics in accounting, inventory management,
marketing, sales forecasting, and financial analysis. It helps
you know the financial formulas, fractions; measurements
involved in interest calculation, hire rates, salary
calculation, tax calculation etc. which help complete business
tasks efficiently. Business mathematics also includes
statistics and provides solution to business problems.

Business is always surrounded with challenges which need to

be dealt with in a proper fashion so that they do no arise in
future. These problems that occur on a daily basis can be
effectively solved with the help of mathematical models.
Hence mathematics not only helps to calculate but also
analyze business problems and work upon them. Learning
and using business mathematics enables a person to think
out of the box, sharpens one’s thinking and helps in precisely
formulating and structuring relationships

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The role of mathematics in Business decisions has very
important in the process of managerial decision models and
algorithms. To turn to the specific aspects of the quantitative
decision making process, it is possible to recognize three
distinct phases in every decision situation. First is carefully
defined the problem, second is a conceptual model to be
generated and third is the selection of the appropriate
quantitative model they may lead to a solution. Lastly a specific
algorithm is selected. Algorithms are the orderly delineated
sequences of mathematical operations that lead to a solution.
The algorithms generate the decision which is subsequently
implemented managerial action program. The entire process is
shown below: Defined problem ——> Conceptual model —>
Quantitative Model —-> Algorithms—-> Decision —- Action
programs.

Measuring Economic Performance:

The Gross Domestic Product, commonly known as the GDP, is
the sum of private consumption plus government spending plus
gross investment plus the difference or exports minus imports.
It's a lot of additions and in a failing economy subtractions, for
which you need math skills to compute. To find the GDP per
capita, you must divide the nominal GDP by the country's
population. Furthermore, the growth or shrinking of an economy
is evident when subtracting the newest GDP estimates with
older data.

Criticism on mathematics:
Mathematics is not numerology, nor is it accountancy; nor is it
restricted to arithmetic. Pseudo mathematics is a form of
mathematics-like activity undertaken outside academia, and
occasionally by mathematicians themselves. It often consists of
determined attacks on famous questions, consisting of proof-

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attempts made in an isolated way (that is, long papers not
supported by previously published theory). The relationship to
generally accepted mathematics is similar to that between
pseudoscience and real science. The misconceptions involved
are normally based on misunderstanding of the implications of
mathematical rigor; attempts to circumvent the usual criteria for
publication of mathematical papers in a learned journal after
peer review, often in the belief that the journal is biased.

Role of mathematics in business:

Mathematics is used in most aspects of daily life. Many of the
top jobs such as business consultants, computer consultants,
airline pilots, company directors and a host of others require a
solid understanding of basic mathematics, and in some cases
require a quite detailed knowledge of mathematics. It also play
important role in business, like Business mathematics by
commercial enterprises to record and manage business
operations. Mathematics typically used in commerce includes
elementary arithmetic, such as fractions, decimals, and
percentages, elementary algebra, statistics and probability.
Business management can be made more effective in some
cases by use of more advanced mathematics such as calculus,
matrix algebra and linear programming.

Commercial organizations use mathematics in accounting,

inventory management, marketing, sales forecasting, and
financial analysis.

In academia, “Business Mathematics” includes mathematics

courses taken at an undergraduate level by business students.
These courses are slightly less difficult and do not always go
into the same depth as other mathematics courses for people
majoring in mathematics or science fields. The two most
common math courses taken in this form are Business Calculus

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and Business Statistics. Examples used for problems in these
courses are usually real-life problems from the business world.

An example of the differences in coursework from a business

mathematics course and a regular mathematics course would
be calculus. In a regular calculus course, students would study
trigonometric functions. Business calculus would not study
trigonometric functions because it would be time- consuming
and useless to most business students, except perhaps
economics majors. Economics majors who plan to continue
economics in graduate school are strongly encouraged to take
regular calculus instead of business calculus, as well as linear
algebra and other advanced math courses.

Other subjects typically covered in a business mathematics

Curriculum include:

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Matrix;
The governing board for a Fortune 500 company is expected to collect votes of managers within the
company on a potential new policy change in the way it manages clients. It needs at least 250 votes
to pass the policy. From past experience, 30% of technical managers and 60% of administrative
managers voted in favor of a similar policy. In total, there are 715 managers across the company.
What is the least number of votes from each group necessary to pass the policy?

Tech Admin Votes in Favor

605 110 .30(605) + .60(110) = 247.5

604 111 .30(604) + .60(111) = 247.8

603 112 .30(603) + .60(112) = 248.1

602 113 .30(602) + .60(113) = 248.4

601 114 .30(601) + .60(114) = 248.8

600 115 .30(600) + .60(115) = 249

599 116 .30(599) + .60(116) = 249.3

598 117 .30(598) + .60(117) = 249.6

597 118 .30(597) + .60(118) = 249.9

596 119 .30(596) + .60(119) = 250.2

595 120 .30(595) + .60(120) = 250.5

594 121 .30(594) + .60(121) = 250.8

593 122 .30(593) + .60(122) = 251.1

Algebra.
Linear programming
Probability theory.

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Use of Business Mathematics in business:
Production costs calculation:
Before one formally starts production and establishes its
business it is very important to estimate the costs that would
be incurred in relation to the manufacturing such as the cost
of raw materials, machinery, rent, administrative expenses
etc. In addition to these basic expenses there are other
associated costs such as marketing, warehousing, interest
and repayment of loans etc. Once all he expenses relating to
production have been included I would be easy to estimate
the profit from it to sustain and remain competitive in the
market. Accurately determining the cost associated with each
item will make the base for the business strong.

Price determination:
When you have successfully determined the costs, the next
task is to price the products correctly so that it generates right
amount of cash flows for future requirements of the business.
Charging the correct selling price would ensure that the
product remains profitable.

Profit Measurement:
These require determining the net profit by subtracting the
operating costs from the total amount of sales/revenue during
a period of time. What also needs to deducted are the tax,
depreciation, discount expenses. This helps to find out if the
products are being charged enough to continue the business
operations and expenditures.

Financial analysis:
You need to project the revenue and expenses of a business
if we need to analyse the financial health of a business. We
need to do sensitivity analysis of how an increase or

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 decrease in sales figure or pricing could affect the business. It
helps in determining how each employee contributes to the
business and how I would affect. Using business mathematics
helps in making these interpretations ad take the business to
a higher level.

Career in Business Mathematics:

In addition to mathematical knowledge any person who wants
to make their career in business mathematics one needs to
also have knowledge of subjects like economics, finance and
business management in order to open up many doors in this
challenging field. As far the skills goes one has to have good
oral and written communication skills as business
mathematicians need to work on teams, collate research and
be in contact with clients.
Since all corporations require managing their money and
business many mathematicians find employment in these
fields. Mathematicians follow a logical thinking follow a
problem-solving approach to business.
Companies hire mathematicians to work as the following:
 Actuaries
 Financial analysts
 Insurance underwriters
 Budget Analysts
 Market Research Analyst
 Securities Analyst

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