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Preface

The Art of Mathematics in Business provides managers and entrepreneurs with the information, analysis, and insights necessary to analyze and calculate the consequences of a wide range of business financial strategies and problems. The ability to select the right operational technique is vital if the business is to survive, profit, and grow in today’s uncertain economic environment. The manager and entrepreneur of a business must be able to make the right financial decision based on sound mathematical reasoning in order to run the business efficiently. He or she must understand the problem, and then apply math skills to solve it.

This book is a comprehensive, one-stop desk reference for managers and owners of businesses who must use quantitative calculations to make daily operating and investing decisions. Its purpose is to provide the fundamentals of business math techniques that can be quickly applied to real-word problems. This unique resource will save countless hours of research time by making sound financial planning truly easy. It provides analyses as well as clear and understandable explanations of complex business problems. Basic mathematical techniques are presented in a step-by-step fashion that takes the reader through each stage of the problem-solving process. The examples in this book provide an invaluable and effective operating tool. This book also contains user-friendly personal computer techniques. The examples enable the businessperson to measure results and to report the data in an easy-to-understand format.

Each section begins with an overview of the mathematics necessary to solve the problem under discussion. The presentation of the data will enable the business owner to select and use the appropriate statistical method to make cost-effective and profitable business decisions. The language associated with the mathematical techniques can also be adopted by the manager when circumstances require communication with investors, lenders, vendors, customers, employees, and other

parties associated with the enterprise. Each business math tool is illuminated in the following, step by step fashion:

Introduction

How is it computed?

Can a computer help?

How is it used and applied?

The objectives and methods illustrated in this book cover a wide range of areas, including management, marketing, accounting, taxes, finance, operations, insurance, and economics. This book provides solutions to traditional as well as new operating and financial problems created by today’s uncertain economic environment. It also advises the business manager and/or business consultant about ways to respond to sudden and unexpected problems. Complex business problems are broken down into smaller ones for easier solution.

This book is divided into parts, each of which covers an area that is important in starting and running a business. Part topics include managing cash and inventory, evaluating loans and credit, researching the market and competition, and preparing financial statements. Each part is broken down into sections. For example, budgeting and profit planning is made up of sections that discuss such important areas as predicting sales and costs, cash flow analysis, the allocation of financial resources, and finding the payback period. This book also contains illustrative and practical mathematical formulas, equations, models, ratios, and other statistical techniques that can be used to make sound and profitable business decisions. The examples in each section focus on financial problems and highlight the importance of using mathematical and financial management principles.

Other topics covered in The Art of Business Math include the methods used to find the correct level of inventory, determining the amount and rate of production, computing profits, finding the rate of return, monitoring and controlling costs, allocating financial resources, analyzing the financial position of the business, identifying trends, comparing performance to that of competitors, evaluating supervisors and employee productivity, using human and physical resources efficiently, determining how much and when to reorder, computing the necessary amount of merchandise safety stock, whether to offer a discount to customers, computing the cost of financing, determining cash requirements, computing the breakeven point, calculating the debt level, finding the variances between budgeted and actual revenues and/or costs, forecasting sales accurately, calculating adequate insurance coverage, finding the tax liability, computing the potential cash flows for projects, analyzing floor space, evaluating the effects of inflation, appraising customer relationships and transactions such as average order size and the number of backorders, computing the value of the business, and identifying potential bankruptcy so steps may be taken to avoid it. The business operator will also learn am how to use a computer to assemble data and perform rapid calculations which will promote the effective use of the mathematical procedures. There are also in-depth discussions of both simple and complex mathematical applications that may be applicable to a particular problem. Each quantitative approach is described clearly and concisely. In some cases, the reader will be directed to the use of financial calculators, spreadsheet programs such as Excel, Lotus 1-2-3 add-ins, stand-alone specialized computer software, accounting software, and cash management software.

The author does not assume that the reader has any mathematical expertise. Thus both the novice and the experienced businessperson will profit from the methodology contained in this action-oriented book. The applications will make the business manager competent in the use of the most up-to-date managerial tools. The presentation is easy to understand and is user-friendly. This book shows what the mathematical technique measures, why it is important, when it should be used, how it should be used, and what the numbers mean.

The field of financial management has recently witnessed a dangerous period of rapid change, stagnation, and contraction. Uncertainty about the future growth of the economy has forced the business operator to be more prudent and sophisticated in the allocation of financial resources. It is therefore imperative that business owners employ new mathematical and financial management techniques to aid their decision making. The author is aware of these vital and complex techniques and cover them in clear and concise detail.

The business manager must also be aware of both the usefulness and the limitations of the particular mathematical technique employed to solve a problem. This book points out, when required, that a particular technique may be appropriate in one situation but not in others. This book also contains hundreds of filled-in examples, illustrations, practical applications, measures, procedures, rules of thumb, statistical data, exhibits, tables, graphs, and diagrams. They are presented to aid in the comprehension and successful solution of a particular problem. The reader will also learn when and how to use the appropriate computational method, why it is used, when computer techniques such as spreadsheets should be used, and how to read and analyze the computer printout. Typical questions of concern to business managers are answered, such as: How much sales are needed to justify the cost of a proposed advertising program? How many factory workers are required to meet production needs? Is the business growing, and how does it compare to competition?

In today’s marketplace, economic downturns force business managers to face new challenges. This book will minimize the effects of these potentially disastrous periods. It is designed to maximize both the profits and the value of the firm for its owners. This is a central objective of this book, and each financial procedure discussed is linked to the impact it has on the value of the firm. The reader will find this book useful, practical, comprehensive, and profitable. Keep it handy as an easy-to-use reference. There is cross-referencing of topics and mathematical techniques. The index can be used to find a specific area of interest. The glossary defines important mathematical terms.

In summation, this book is an invaluable addition to any library and will provide quick and accurate answers to the business entrepreneur and manager. It will make an individual “savvy,” comfortable, and proficient in both the business math and the financial applications required for the successful operation of any business.

Jae K Shim

Los Alamitos, California