Business Mathematics

ACCA F2 - Management Accounting

Use of mathematics is fun. Math is used in business to manage and manipulate business operations. Quantitative data are primary elements of mathematical information. Managers process data through mathematical operations. They use spreadsheet to simplify calculation process. Various database programs are also used in business. The result are then summarised and presented in visual and written forms. The information is used to budget and forecast business activities.

Business math can be divided into various sub-units.

Ø  Basic mathematical operations and statistics: Basic mathematical operation like calculating discount received or given, total, subtotals, addition, subtraction, multiplication and division are used by all staffs in day to day operation of business. It includes use of simple algebraic formulas (like pricing function and learning curve) and rounding techniques.

Ø  Probability and matrix: We see in article titled 'managerial process and styles' that managerial task comprises with making choices out of available alternatives; these alternatives are surrounded by uncertainty. Therefore, managers use probability and payoff is often used to define business position.

Ø  Time series analysis (trend analysis): Forecasting and budgeting make best use of time series and trend analysis. It increases the foreseeability of managers. It brings series of historical events together and defines an established pattern over which managers base their decisions.

Ø  Discounting and compounding: Mostly used in financial managers discounting and compounding is core of financial mathematics. Assessment of time value of money rests on simple to complex discounting and compounding approach used by financial managers.

Ø  Advanced statistics: It is the study of inter-relationship between different sets of variables. It includes risk-return relationship (standard deviation and variance), co-relation and regression of datasets, the nature of data (normal, discrete = binomial and Poisson) and the probability.

From simple sales activity to accessing performance and budgeting and forecasting, math is used as tools to record, analyse, present and interpret data and information to relevant person.

ACCA Article: The Risks of Uncertainty

CIMA link: Fundamentals of business mathematics