# Why we have to study business mathematics? Please explain in simple sentence.

Why we have to study mathematics for business? Please explain in simple sentence.

asked Jul 16, 2016 in General 1,976 views

Why we have to study business mathematics?

Business mathematics is used extensively by commercial enterprises in recording and managing business operations.  Business Mathematics is used in accounting, financial analysis, sales forecasting and inventory management   Mathematics typically used in business includes Arithmetic, Algebra, Statistics, Calculus, Matrix Algebra and Operations Research. I will give you below a few examples to illustrate the usage of Business Mathematics to Business Operations.

1.   Suppose a company has 3 factories where it manufactures its product and 10 outlets from where the product is sold. How much product should be transported from which factory to which outlets, depends not only on the costs of transporting but also how much each outlet can store and has sales. The problem is to match factories and outlets in such a way that we incur minimum cost.   This problem can be solved by the Transportation Model (Simplex Method) taught in Operations Research.

2.   For project management, we use Critical Path Method and (CPM) and Programme Evaluation Review Technique (PERT).  These also involve maths.

3.   In the business word future is very uncertain, particularly for new and small businesses.   This is so because small business are more volatile and there is no tract record of newer businesses.  For such business we can use probability distribution to estimate future sales and earnings. Now here we are using a statistical tool.

4.   For calculating risk in business we use Standard Deviation which is a measure of dispersion.

5.   If the Actual Cost of a product is different from its budgeted cost, we have to do the variance analysis.  For doing this we need to know basic maths like ratios etc.

From the above examples I think it is quite evident that it is very necessary to study Business Mathematics for business management.
answered Aug 1, 2016 by (3,971 points)