VALENCIA MTB 1103 - Business Mathematics Topics

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Business Mathematics Topics The most important topics covered in Business Mathematics are Profit and Loss Statistics Interest Rates Loans Simple and Compound Interest Markups and markdowns Taxes and Tax Laws Discount Factor Annuities Insurance Credit Depreciation Future and Present Values Financial Statements Business Mathematics consists of Mathematical concepts related to business It comprises mainly profit loss and interest Math s is the base of any business Business Mathematics financial formulas measurements which helps to calculate profit and loss the interest rates tax calculations salary calculations which helps to finish the business tasks effectively and efficiently Business Mathematics is highly related to the 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 Math s such as formulas to find a profit loss their percentages discount etc Even Though the requirement of this subject does not contain pure Math s it needs Mathematical thinking and some Math s formulas Here we will discuss what is Business Mathematics terminologies and important formulas with problems and solutions What is Business Mathematics Business Math always deals with profit or loss The cost of a product is fixed by taking into consideration it s profit margin cash discount trade discount etc Business mathematics is used by commercial companies to record and manage business works Commercial businesses use math s in departments of accounting inventory management marketing sales forecasting and financial analysis 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 Business Mathematics Formulas Here the 9 basic Business Mathematics formulas that we cannot ignore Net Income Formula Accounting Equation Net Income Revenue Expense Assets Liabilities Equity Equity Assets Liabilities Cost of Goods Sold Formula COGS Beginning inventory Purchase during the period Ending inventory Break Even Point Fixed cost Sales Price per unit variable cost per unit Break Even point Formula Current Ratio Formula Profit Margin Formula Current Ratio Current Assets Current Liabilities Profit Margin Net Income Revenue 100 Return of Investment ROI Formula ROI Invest gain Cost of Investment Cost of Investment 100 Markup Formula Markup Percentage Revenue COGS COGS 100 Selling Price using Markup COGS markup percentage COGS Where COGS Cost of goods sold Inventory Shrinkage Formula Business Mathematics Example Inventory Shrinkage Recorded Inventory Actual Inventory Recorded Inventory 100 While doing business one can earn a good profit or face loss The price of a product is fixed taking into consideration it s cost price profit margin trade discount cash discount etc The price marked on the commodity is called marked price or catalogue price For trading purposes the manufacturer proposes a discount on the MRP to the buyer This is called a trade discount In addition to the trade discount if the buyer pays cash against goods he gets another cut called cash discount The price of the object after subtracting the trade discount and cash discount is called the selling price Thus we have Selling price Cost price Discounts Let us discuss the most important concept called Profit and Loss here Profit and Loss A profit is the earned amount received by a business on selling a product whereas loss is the amount which is less than the actual price of the product The formula for profit and loss is given based on the selling price and cost price of a commodity Profit Selling Price Cost Price S P C P S P C P Loss Cost Price Selling Price C P S P C P S P Both these measures have their percentage value also and they are given by Profit S P C P C P x 100 Profit C P x 100 Loss C P S P C P x 100 Loss C P x 100

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