Business Mathematics
What this domain tests
Business Mathematics tests arithmetic and commercial calculations: percentages, ratios, profit and loss, discount, simple and compound interest, annuities, time and work, and basic algebra. The exam checks speed and correct identification of the base value.
Core rules
- Percentage change = change / original base x 100. Always identify the correct base before calculating.
- Profit or loss percentage is normally calculated on cost price. Discount is calculated on marked price.
- Simple interest = P x R x T / 100. Compound amount = P(1 + r/n)^(nt), where n is compounding frequency.
- For successive percentage changes, multiply factors: a 10% rise followed by a 10% fall gives 1.10 x 0.90 = 0.99, a net 1% fall.
- Annuities involve equal periodic cash flows. Use present value or future value factors rather than adding undiscounted amounts.
- In time and work, convert days to work rates: if A finishes in 10 days, A's rate is 1/10 per day.
Worked example
INR 10,000 is invested at 10% per annum compounded annually for 2 years. Amount = 10,000 x (1.10)^2 = 10,000 x 1.21 = INR 12,100. Compound interest = 12,100 - 10,000 = INR 2,100. Simple interest for the same period would be 10,000 x 10 x 2 / 100 = INR 2,000. The extra INR 100 is interest on the first year's interest.
Traps that cost marks
Do not add successive percentage changes directly. Do not calculate profit on selling price unless the question specifies it. Do not mix annual and monthly rates without converting time. Discount and markup are not the same. Check whether interest is compounded half-yearly or quarterly.