Introduction to Business
Mathematics
Dr S. M. Sohrab Uddin
Professor, Department of Finance
Director, Bureau of Business Research
Faculty of Business Administration
University of Chittagong
Importance of Mathematics in Business Studies
• Business mathematics is used by business enterprises to record and
manage business operations. That is, business mathematics plays a vital
role in creating the base of the business.
• This particular subject helps in pricing the products and services after
analyzing all the costs and then in calculating the gross or net profit.
• Business mathematics helps in assessing the financial performance of the
business.
• This very discipline helps in taking and improving decision making about
different aspects of business such as costs, raw materials, marketing,
advertising, strategies for the short and long term, etc. It helps in analyzing
unforeseen situations and making decisions in favor of the company.
Dr. S. M. Sohrab Uddin, Professor, Department of Finance, CU
Scope of Business Mathematics
• Mathematics typically used in business that includes
elementary arithmetic, such as fractions, decimals, and
percentages, elementary algebra, statistics, and probability.
• Mathematics can make business more effective in some
cases through the use of more advanced mathematics such
as calculus, matrix algebra, and linear programming.
Dr. S. M. Sohrab Uddin, Professor, Department of Finance, CU
Objectives of Business Mathematics
We can use business mathematics for the following objectives:
• It enables the management to decide when to buy and how much to buy;
• It improves the quality of decision making;
• It helps to identify the most appropriate solution;
• It assists to integrate the system as a whole;
• It facilitates in minimizing cost and maximizing profit;
• It helps to improve productivity and efficiency;
• It shows the way to compete with the competitors;
• It ensures optimum allocation of resources.
Dr. S. M. Sohrab Uddin, Professor, Department of Finance, CU
Mathematics and Business Management
Allocation & Distribution:
Optimal allocation of limited resources;
Location and size of warehouses, distribution centers, etc.;
Distribution policy.
Production:
Selection, location and design of production plants;
Evaluation of machine performance;
Inventory management and quality control;
Maintenance policy;
Scheduling and sequencing of production runs.
Procurement:
What, how and when to purchase at the minimum procurement cost;
Bidding and replacement policies.
Dr. S. M. Sohrab Uddin, Professor, Department of Finance, CU
Mathematics and Business Management (Cont.)
Marketing:
Product selection and timing;
Selection of advertising media;
Demand forecasts and stock levels;
Customer preference for size, color and packing of various products.
Finance:
Capital requirements and cash flow analysis;
Selection of securities;
Credit policies and credit risk analysis;
Investment and profit plan.
Personnel:
Selection of personnel and incentive plan;
Assignment of jobs and performance appraisal.
Research & Development:
Development of new product lines;
Evaluation of exiting products and optimal use of resources.
Dr. S. M. Sohrab Uddin, Professor, Department of Finance, CU
Limitations of Mathematics in Business Studies
• Business mathematics does not consider the qualitative aspects;
• It is often difficult to define all the important elements of a model in
mathematical terms and set them down on paper;
• Models may inaccurately reflect the real situation and one may fail to take
into account all variables and expectations;
• It requires adequate knowledge and experience in model building in
business mathematics as well as in using models;
• Business models may sometime be very expensive in relation to the
expected returns from their use;
• In many occasions, it is difficult to communicate with management about
the solutions derived from the model.
Dr. S. M. Sohrab Uddin, Professor, Department of Finance, CU
