Business Math in Real Life Business

Course Code: FIN-1105

Submitted To:
Kawser Ahmed Shiblu
Assistant Professor
Department of Finance
Jagannath University

Submitted By:
Group 9
Department of Finance
Jagannath University

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 Group Number :-09

SI Num Name ID

1 Quazi Golam Sarwar B-200203003

2 Sumit Mondol B-200203079

3 Md. Abdur Rahman Noyon B-200203091

4 Sami Hossain B-200203096

5 Ripon Hossain B-200203118

6 Md.Shirajul Amin B-190203087

7 Md.Toyobuzzaman Talukder B-190203104

8 Johora Jannat B-18020309

9 MD. Sayeed B-190203074

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Acknowledgement

All praises are due to Almighty Allah, the supreme authority of this universe, who has enabled us to s
for the Business Mathematics course. We express our cordial sense of appreciation, thanks, authent
profound regards to our honorable supervisor Kawser Ahmed Shiblu, Lecturer, Department of Financ
Dhaka, for his academic direction, pleasant support, constant encouragement, precious guidance, ov
continuous importance throughout the thesis work. It's a great pleasure for us to express profound g
admiration to our dearly loved parents, well-wishers, and friends for their ever-ending wish, affection
inspiration, encouragement, and nonstop endorse in the long process of creating our academic care
repaid.

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 Table of Content

Acknowledgement 3
Introduction 5
Executive Summary 6
Business Mathematics 7
Area of Business Mathematics. 7
Linear Equations 8
Break-Even Analysis 9
Set Theory 10
Venn Diagram 11
Arithmetic progression 11
Geometric Progression 12
Logarithm 12
Mathematics for Finance 13
Conclusion 13
Reference 14

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Introduction
Business Mathematics refers to the concept of a mathematical model related to our real-life
business. In real-life business, we give the foremost priority to profit, loss, and interest rate.
Without reviewing profit percentages, no companies can make progress, and math is the
most reliable source for finding out or evaluating the current status of the business. So, we
can say that math is the basis of any business because mathematical formulas like salary
calculation, fixing employee's compensation package, finding out the annual interest rate,
yearly company turnover, and the annual tax rate help to finish the business efficiently and
effectively. Generally, commercial companies use business mathematics in their day-to-day
operations. They have multiple departments like Accounting, Procurement, Finance,
Marketing and Branding, Research & Development, etc. Marketing Department uses
business math (Sales Forecasting) to determine actual customers' needs and wants.
Human Resource Department uses business math for calculating employee benefits,
salaries, and performance matrix. Without implementing math, no conclusion can be made
by the HR manager. The procurement department takes the help of math for managing
inventory management. What will lead time be, and how many safety stocks should a
company maintain for their regular operations. These all are impossible without taking help
of mathematics. Business Mathematics Basic Terms: Selling Price: The market price is
taken to sell a product. Cost Price: The original price of the product is the cost price. Profit:
If the selling price is more than the cost price, the difference in the prices is the profit. Loss:
If the selling price is less than the cost price, the difference in the prices is the loss.
Discount: The reduced amount in the selling price of a product. Simple Interest: Simple
interest is that interest which is counted against the capital amount or the portion of the
main amount that remains unpaid. Compound Interest: Compound interest is the
investment rate that increases exponentially

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Executive Summary
There are a lot of examples of the usage of Maths in our day-to-day life. Even birds and
insects make the use of Maths in making their shelter. Many see math as a complex
subject, but in reality, if anyone gets proper guidance, he or she can excel in Mathematics
as a subject. It is more understandable if taught through quizzes and games as it makes the
learner use his mental ability to the maximum level. Through them, we can get the students
to get a proper clarity of the topic being discussed. It also makes the concept clearer in the
mind of young learners. The love or phobia for the subject in the child for this subject
depends on the efficiency of the teacher. The more efficient and innovative the teaching
methodology is the more understanding among the children related to the subject. If a child
is trying to solve a problem, he should be appreciated. Yes, his mistakes must be corrected
on the spot but without any judgment or criticism. It is important no matter which field we
belong to. We use Maths every day without a hint of using it. We use Maths every day
without a hint of using it. To make the payments, be it to a vegetable vendor or milkman, for
an electricity bill or phone bill, the knowledge of numbers is very important, and the
knowledge of numbers is an integral part of Maths. It is also used by our housewives on a
general basis without even considering it important. While preparing food, we need to have
proper and measured quantities of the ingredients to be used. How will we measure if we
don’t have the proper knowledge of Mathematics? Without the awareness of numbers and
their usage, we will not be able to cherish the tasty food items, and it is also impossible to
make adjustments if needed. For shopping, which is everyone’s favourite pastime and a
must on the to-do list, we require knowledge of numbers or maths. How much to buy and
how much to pay for it is an essential thing for us to know. So we need to have a good grip
on maths and numbers. Maths is vastly applied in the banking sector, or we can say that
Mathematics will be the backbone of the banking sector. Without the use of maths and
numbers, you will not be able to do anything in a bank. The dependency of banking on
Maths is around 90%. You need to have a good hold on numbers if you are a part of the
banking sector. For the proper and accurate handling of all the transactions and accounts
you should be good at numbers. For an ordinary person also Maths is a necessity. We need
Maths to know – what is our deposited amount and what interest we are getting on it, what
will be the interest we have to pay if we apply for a loan etc. we need to have a basic
knowledge of maths. So be it the customers or the employees, they both need to be familiar
with the subject.

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Business Mathematics
Business Mathematics consists of Mathematical concepts related to business. It comprises
mainly profit, loss and interest. Maths is the base of any business. Business Mathematics
financial formulas, measurements which help to calculate profit and loss, the interest rates,
tax calculations, and salary calculations, which help to finish the business tasks effectively
and efficiently
Business Mathematics is highly related to Statistics concepts which give solutions to
business problems. In business, we deal with the exchange of money or products which
have a monetary value. Each business leads to some profit and some loss. To identify
these factors, we have to study the primary topics of Maths such as formulas to find a profit,
loss, their percentages, discount, etc. Even Though the requirement of this subject does not
contain pure Maths, it needs Mathematical thinking and some Maths Formula.

Area of Business Mathematics

The most important topics covered in Business Mathematics are

• Profit and Loss

• Statistics
• Simple and Compound Interest
• Interest Rates
• Loans
• Markups and markdowns
• Taxes and Tax Laws
• Discount Factor
• Annuities
• Insurance
• Credit
• Depreciation
• Future and Present Values
• Financial Statements
.

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Linear Equations
The applications of linear equations are vast and are applicable in numerous real-life
situations. To handle real-life situations using algebra, we change the given situation into
mathematical statements. So that it clearly illustrates the relationship between the unknown
variables and the known information. The following are the steps involved to reiterate a
situation into a mathematical statement,
* Convert the real problem into a mathematical statement and frame it in the form of an
algebraic expression that clearly defines the problem situation.
* Identify the unknowns in the situation and assign variables of these unknown quantities.
* Read the situation clearly a number of times and cite the data, phrases, and keywords.
Sequentially organize the obtained information.
* Write an equation using the algebraic expression and the provided data in the statement
and solve it using systematic equation solving techniques
* Reframe the solution to the problem statement and analyze if it exactly suits the problem.
Using these steps, the applications of word problems can be solved easily.

Applications of Linear Equations in Real life The following are some of the examples in
which applications of linear equations are used in real life.
* It can be used to solve age-related problems.
* It is used to calculate the speed, distance and time of a moving object. * Geometry-related
problems can be solved.
* It is used to calculate money and percentage-related problems.
* Work, time and wages problems can be solved.
* Problems based on force and pressure can be solved.

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Break-Even Analysis
The break-even analysis is one tool that every entrepreneur should use in their financial
planning. It helps you understand your business’s revenue, expenses and cash flow –
which is critical to keeping your doors open and your business profitable. Read on to learn
about break-even analysis and how this essential form of financial planning helps business
owners make informed decisions. A break-even analysis informs you of the bare minimum
performance your business must meet to avoid losing money. It also helps you understand
at which point you’ll generate profits so you can set production goals accordingly. You can
use this information when your business is in the planning stages to determine whether
your idea is feasible or not. Then, once your business is established, you can use a break-
even analysis to develop direct cost structures and identify opportunities for promotions and
discounts. While there is a lot to know about conducting a break-even analysis, let’s focus
on the three most common uses. 1. It helps you identify the point of profitability. A business
that doesn’t profit could take a turn for the worse at any time. This is why every company
needs to focus on its point of profitability. Ask yourself these questions: * How much
revenue do I need to generate to cover all my expenses? * Which products or services
generate a profit? * Which products or services are sold at a loss? It ensures that you
properly price a product or service. When most people think about pricing, they primarily
take into account how much their product costs to create and fail to consider overhead
costs – underpricing their products as a result. Finding your break-even point will help you
price your products correctly. You will know where you need to set your margins to
generate the right amount of revenue to break even and begin turning a profit. If you offer
only a couple of products or services, determining your break-even point is simple. It
becomes more challenging as your service offerings and production increase.

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Set Theory

Predicting business failure before it actually happens is very important in order to be able to
take the necessary preventive measures. Such predictions are most important in banking
sectors since they are the ones that support the economy of most countries. With the
knowledge of set theory, one can use the Rough Set Theory to predict the possibility of
bank or business failure. This theory was proposed by Pawlak, and since then, it has
attracted the attention of many researchers and practitioners across the world. Many
scholars have of late contributed to its development and application. Due to its
effectiveness, the theory has been used in other fields apart from business. Through this
theory, many investigations have been made successfully, which includes research in
pharmacology and analysis of relationships between the chemical structure and the
antimicrobial activity of drugs. Rough sets are considered to be sets with indistinct
boundaries, and the basic concept here is the whim of approximation space. First, a range
of minimal subsets of independent attributes is constructed. Next, a reduced decision table
is constructed, eliminating the redundant attributes. Finally, the set of sorting rules and
algorithms is derived on the basis of the decision table, with the firms being classified by
matching their descriptions to the set of sorting rules (Ruzgar, Unsal, and Ruzgar, 2008,
PP.58-9). Fuzzy set theory has also helped in business production management. Its ability
to quantitatively and qualitatively model problems which involve vagueness and imprecision
has led to researchers in production management using it. The theory has been used in
areas of production management, such as in new product development, production
scheduling and control, and inventory management, to mention but a few (Bradshaw, 1983,
pp.403-08). Karwowski and Evans have given three reasons why fuzzy set theory is
relevant to production management. First, as imprecision and vagueness are inherent to the
decision makers, their experience and judgment may be used to complement established
theories to promote a better understanding of the problem. Secondly, in production
management, the information used in formulating a model’s objective, decision variables,
constraints and parameters may not be precisely measurable. Thirdly, the quality of
available information may be weakened by imprecision and vagueness as a result of
personal bias. Hence the theory can be used in filling the gaps between descriptive and
prospective models in production management research. As sets theory has exhibited
potential in business management and growth, many business researchers have resulted in
developing the existing theories to make them more productive hence helping in business
running.

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 Venn Diagram
A Venn diagram can be used to show the changing nature of work in the world. Venn diagram
can also be used by human resources managers and careers. Advisors to show the
characteristics of different jobs. A Venn diagram can be used for analysing the effectiveness
of a website. In a business Venn diagram is used to show the different types of its customers
and their attitudes.
For example, in a business, 50% of customers like product x and the other 50% like product y,
and it also shows that 20% like both products x and y. A Venn diagram is an easy way to
show the actual state of the business.

Arithmetic progression
Arithmetic progression is a sequence of numbers such that the difference between the
consecutive terms is a constant. Looking at this definition, I can say that arithmetic progression
can be applied in real life by analyzing a certain pattern that we see in our daily life. For example,
Old faithful is a natural geyser (at the Yellowstone national park) that produces long eruptions
that are easily predictable and surprisingly, no one controls it! The time between eruptions is
based on the length of the previous eruption If an eruption lasts one minute, then the next
eruption will occur in approximately 46 minutes. If an eruption lasts for 2 minutes, then the next
eruption will occur in 58 minutes. The eruptions thus occur in the sequence of 46, 58, 70, 82,
and 94..... with a common difference of 12. This pattern will come in handy the next time you
visit Yellowstone national park. Another example is when you are waiting for a bus. Assuming
that the traffic is moving at a constant speed, you can predict when the next bus will come. If
you ride a taxi, this also has an arithmetic sequence. Once you ride a taxi, you will be charged
an initial rate and then a per mile or per kilometre charge. This show an arithmetic sequence
that for every kilometre, you will be charged a certain constant rate plus the initial rate. An
arithmetic sequence can be applied in almost all aspects of our lives. We just have to analyze
how it can be used in our day-to-day life. Having knowledge about this kind of sequence can
give us a different perspective on how things happen in our lives.

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 Geometric Progression
Geometric progression is used in accountancy in finding the Present Net Value of projects
(specifically, the value of money each year based on the discount factor). It is also used in
annuities, working out monthly repayments of loans and values of investments - compound
interest is a geometric progression.

Logarithm
The use of logarithmic function in modelling business applications can be easily established.
This is because the limits on every factor can be changed easily according to circumstances.
The logarithm function is used since non-fixed numerical values affect sales either positively or
inversely.
Let's say you're making 7% interest on a $1000 investment, and you're curious to know when
your money will double.
You are trying to solve the equation
1000∗1.07𝑥=2000 1000 ∗ 1.07 x = 2000
If we divide both sides by 1000, we get
1.07𝑥=2 1.07 x = 2
If we take the natural log of both sides we get
ln(1.07𝑥)=ln(2)
Using the “peel-off rule” which states
log(𝑎𝑏)=𝑏∗log(𝑎)
we get 𝑥∗ln(1.07)=ln(2)
In other words 𝑥=ln(2)ln(1.07) x = ln ( 2 ) ln ( 1.07 ) which is the same as 𝑥= log1.07(2) log
1.07 ( 2 ) which equals about 10.244768 10.244768
So, after about 10 years, your investment would have doubled
Thanks to the logarithm!

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 Mathematics for Finance
Mathematics in Finance actually means the time value of money. The time value of money is
essential because it helps investors and people saving for retirement determine how to get the
most out of their dollars. This concept is fundamental to financial literacy and applies to your
savings, investments and purchasing power.
Financial mathematics is common across many industries, and there are several real-world
applications of financial math, including Risk management. One application for financial
mathematics is risk management. Using this strategy can help professionals identify and manage
financial risks. Financial analysts often use mathematics to analyze market data, find patterns in
data and predict risks. Financial risks can fall under these categories.
Market risk: Market risk refers to financial risks in the company's target market, including market
changes. Financial mathematics can help companies analyze their target market and predict
changes to reduce risks.
Operational risk: Operational risk includes risks that arise from a company's internal factors,
including processes and employees, as well as external events affecting operations. Financial
mathematics can help companies analyze their finances to prepare for and mitigate operational
risk.
Credit risk: Credit risk refers to risks associated with loans and contracts, including being unable
to pay back loans or fulfil contracts. Companies can use financial mathematics to make smart
decisions on loans and contracts to reduce credit risk.
Liquidity risk: Liquidity risk includes short-term and long-term funding risks that can cause a
company to be unable to fulfill financial costs. By analyzing their budgets and predicting
expenses, companies can use financial mathematics to help reduce liquidity risk.

Conclusion
Business mathematics in a business is able to make more profit or enhance financial
performance, which is beneficial for a commercial company. It can solve problems by
reasoning, research and calculation. Business mathematics helps in estimating the incomes &
expenditures along with the risk analysis. Linear equation, set theory, progression, and
logarithm are some ways to help a commercial company to work in a more effective way.

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 Reference
https://byjus.com/maths/business-mathematics/
https://en.wikipedia.org/wiki/Business_mathematics

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