Business Mathematics and Statistics
What the examiner expects
Business mathematics tests commercial arithmetic: percentage, ratio and proportion, profit and loss, discount, simple and compound interest, and break-even. Statistics tests collection, organization, presentation and interpretation of data: frequency tables, bar and pie charts, mean, median, mode, range, standard deviation, index numbers and simple probability. You should be able to choose the right average and explain what a measure of dispersion adds. Interpret results in business language, not just numbers.
Traps
- Mark-up on cost and margin on selling price are different: a 50 percent mark-up is a 33.3 percent margin.
- Percentage points and percent change differ; a rise from 20 percent to 25 percent is 5 percentage points but a 25 percent increase.
- Simple interest is calculated on principal only; compound interest is calculated on principal plus accumulated interest.
- For an even number of observations, the median is the mean of the two middle values.
- An unweighted average of group averages can mislead; weight by group size.
Worked example
10,000 is invested at 10 percent for two years. Simple interest = 10,000 × 0.10 × 2 = 2,000, giving 12,000. Compound interest = 10,000 × (1.10)² = 12,100, so interest is 2,100. The 100 difference is interest on the first year's interest. For three years, compound interest is 10,000 × 1.331 = 13,310.
Rule of thumb
Before calculating, write down what is given, what is asked and the unit required; then estimate the answer. An estimate catches most decimal and percentage errors.