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MTH302 Business Mathematics & Statistics GDB Solution Fall 2013

“Ultimate Goal of a business is to earn profit. How business mathematics can help you in making decision about investment in a business”

Solution: 

The Importance of Mathematics In Business Mathematics plays an important role in our every day life, for example we have to be able to calculate the discount in a shopping mall, the interest when we get a loan from the bank, when we change money into a different currency, just to make sure we are not being taken advantage of, calculate the score in a class exam or our car mileage, all these to make our life easier. Mathematics is used in some of the top jobs such as business consultants, computer consultants, company directors; these jobs require a solid understanding of basic mathematics and in some cases require a quite detailed knowledge of mathematics. ”Business management requires a basic knowledge of mathematics to record and manage business operations like: elementary arithmetic such as fractions and percentages, algebra, statistics and probability as well as by using more advanced mathematics like calculus, matrix algebra and linear programming”. Percentage it’s very useful for those working in selling, they have to be very quick with mental calculations, because the more percentage discount you give a customer, the less profit the company will make, and you will be paid less.’ Management decisions are based on numerous pieces of information obtained from many different sources. They may have used one, some or all the techniques which have been described as Statistical Method, Management Mathematics or Probability. What the decisions will all have in common however is that they are the final product of a general structure known as investigation or survey”. Much of what you will come across in economics will be relationships between different variables. ”The Probability can be thought of as the ability to attach limits to area of uncertainty. For example, company profit for next year is an area of uncertainty, since there will never be the type of information available that will enable management to forecast it’s value precisely. What can be done however, given the likely state of the market and a range of production capacity, is to calculate the limits within which profit is likely to lie. Thus calculations can be performed which enable statements such as ‘there is a 95% chance that company profit next year will lie between $242,000 and $296,000’ to be made se ‘variables’ as their name suggests can take on many different values.

Statistics can be utilized to compare different investments. Different options of investments can be evaluated through different financial techniques / methods like, NPV, PI, IRR, pay back period etc. All this could be possible with the knowledge of mathematics and statistics

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