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.

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.

Interest, in finance and economics, is payment from a borrower or deposit-taking financial institution
to a lender or depositor of an amount above repayment of the principal sum (that is, the amount
borrowed), at a particular rate.[1] It is distinct from a fee which the borrower may pay the lender or
some third party. It is also distinct from dividend which is paid by a company to its shareholders
(owners) from its profit or reserve, but not at a particular rate decided beforehand, rather on a pro
rata basis as a share in the reward gained by risk taking entrepreneurs when the revenue earned
exceeds the total costs.[2][3]
For example, a customer would usually pay interest to borrow from a bank, so they pay the bank an
amount which is more than the amount they borrowed; or a customer may earn interest on their
savings, and so they may withdraw more than they originally deposited. In the case of savings, the
customer is the lender, and the bank plays the role of the borrower.
Interest differs from profit, in that interest is received by a lender, whereas profit is received by
the owner of an asset, investment or enterprise. (Interest may be part or the whole of the profit on
an investment, but the two concepts are distinct from each other from an accounting perspective.)
The rate of interest is equal to the interest amount paid or received over a particular period divided
by the principal sum borrowed or lent (usually expressed as a percentage).
Compound interest means that interest is earned on prior interest in addition to the principal. Due to
compounding, the total amount of debt grows exponentially, and its mathematical study led to the
discovery of the number e.[4] In practice, interest is most often calculated on a daily, monthly, or
yearly basis, and its impact is influenced greatly by its compounding rate.

An interest rate is the percentage of principal charged by the lender for the use of its money. The
principal is the amount of money lent. As a result, banks pay you an interest rate on deposits. They are
borrowing that money from you.

Anyone can lend money and charge interest, but it's usually banks. They use the deposits from
savings or checking accounts to fund loans. They pay interest rates to encourage people to make
deposits.

Banks charge borrowers a little higher interest rate than they pay depositors so they can profit. At the
same time, banks compete with each other for both depositors and borrowers. The resulting
competition keeps interest rates from all banks in a narrow range of each other.