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.
Use of Business Mathematics in business
In order to known a business it requires skill more than the developing a product or providing a service. If a business has to survive ad succeed it needs to look after the finances and make necessary arrangements for it to prosper as well. Understanding business mathematics is important to maintain profitable operations and accurate keeping of records. It is required right from the start for pricing products/services till the end when we need to check if the budget was met. Let’s look at situations where business mathematics is required:
- 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 expand.
You need to project the revenue and expenses of a business if we need to analyze the financial health of a business. We need to do sensitivity analysis of how an increase or 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.
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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:
- Financial analysts
- Insurance underwriters
- Budget Analysts
- Market Research Analyst
- Securities Analyst