Business Mathematics and Statistics
Business Mathematics and Statistics tests numerical fluency and interpretation: percentages, interest, discount, ratios, averages and dispersion, index numbers, probability and simple forecasting. Questions often ask you to choose the right formula and then explain what the result means in business terms.
Core rules
- Percentage change = (new - old) / old x 100. Distinguish a percentage change from a percentage-point change.
- Simple interest: I = P x R x T. Compound amount: A = P(1 + r)^n.
- Trade discount reduces the list price; cash discount is an incentive for early settlement and is not part of the initial invoice price.
- The mean, median and mode describe centre; standard deviation and range describe spread.
- An index number = (current value / base value) x 100.
Worked example
2,000 is invested at 8% per annum for three years. Compound amount = 2,000(1.08)^3 = 2,000 x 1.259712 = 2,519.42, so compound interest is 519.42. Simple interest would be 2,000 x 0.08 x 3 = 480. The 39.42 difference is interest earned on interest. If the rate were quoted as 8% per annum compounded monthly, you would use r = 0.08/12 and n = 36; never mix an annual rate with a monthly number of periods.
Traps
- Entering 8 instead of 0.08 in a formula.
- Treating a 10% fall followed by a 10% rise as no change; the result is 99% of the original.
- Computing the median when the question asks for the mean, or ignoring a frequency distribution.
- Reporting a standard deviation without its unit or comparing spread across different scales without care.