# 3: General Business Management Applications (Get Your Motor Running) - Mathematics

This chapter covers universal business mathematics you will use whether your chosen business profession is marketing, accounting, production, human resources, economics, finance, or something else altogether. To be a successful manager you need to understand percent changes, averages, ratios, proportions, and prorating.

Business is the activity of making one's living or making money by producing or buying and selling products (such as goods and services). [1] [2] [ need quotation to verify ] [3] [4] Simply put, it is "any activity or enterprise entered into for profit." [5]

Having a business name does not separate the business entity from the owner, which means that the owner of the business is responsible and liable for debts incurred by the business. If the business acquires debts, the creditors can go after the owner's personal possessions. A business structure does not allow for corporate tax rates. The proprietor is personally taxed on all income from the business.

The term is also often used colloquially (but not by lawyers or by public officials) to refer to a company. A company, on the other hand, is a separate legal entity and provides for limited liability, as well as corporate tax rates. A company structure is more complicated and expensive to set up, but offers more protection and benefits for the owner.

## Controlling Process in Business Management (5 Steps)

Some of the essential steps of controlling process as studied under Business Management are : 1. Setting Performance Standards 2. Measurement of Actual Performance 3. Comparing Actual Performance with Standards 4. Analysing Deviations 5. Taking Corrective Action.

Controlling Process consists of following systematic steps:

#### 1. Setting Performance Standards:

The first step in the process of controlling is concerned with setting performance standards. These standards are the basis for measuring the actual performance.

Thus, standards act as a lighthouse that warns & guides the ships at sea. Standards are the benchmarks towards which efforts of entire organisation are directed. These standards can be expressed both in quantitative and qualitative terms.

Examples of Quantitative Standards:

(b) Units to be produced and sold.

(d) Time to be spent in performing a task.

(e) Amount of inventories to be maintained etc.

Examples of Qualitative Standards:

(a) Improving motivation level of employees.

(b) Improving labour relations.

(c) Improving quality of products.

In order to facilitate easy comparison of actual performance with the standards, a manager should try to set these standards in quantitative terms as far as possible. However, in case of qualitative standards, effort should be made to define these standards in such a way that comparison becomes easily understandable.

For example, for improving customer satisfaction in a restaurant having self service, standard can be set in terms of time taken to get a table, place the order and collect the order. Moreover, the standards set should be flexible enough so that necessary changes can be made according to varying situations.

#### 2. Measurement of Actual Performance:

Once the standards have been determined, the next step is to measure the actual performance. The various techniques for measuring are sample checking, performance reports, personal observation etc. However, in order to facilitate easy comparison, the performance should be measured on same basis that the standards have.

Following are some of the ways for measuring performance:

(a) Superior prepares a report regarding the performance of an employee.

(b) Various ratios like gross profit ratio, debtor turnover ratio, return on investment, current ratio etc. are calculated at periodic intervals to measure company’s performance.

(c) Progress made in areas like marketing can be measured by considering the number of units, increase in market share etc.

(d) In small organisations, each unit produced can be checked personally to ensure the quality standards.

(e) In large organisation, the technique of sample checking is used. Under this technique, some pieces are checked at random for quality specifications.

#### 3. Comparing Actual Performance with Standards:

This step involves comparing the actual performance with standards laid down in order to find the deviations. For example, performance of a salesman in terms of unit sold in a week can be easily measured against the standard output for the week.

#### 4. Analysing Deviations:

Some deviations are possible in all the activities. However, the deviation in the important areas of business needs to be corrected more urgently as compared to deviation in insignificant areas. Management should use critical point control and management by exception in such areas.

(a) Critical Point Control:

Since it is neither easy nor economical to check each and every activity in an organisation, the control should focus on Key Result Areas (KRAs) which act as the critical points. The KRAs are very essential for the success of an organisation. Therefore, the entire organisation has to suffer if anything goes wrong at these points. For example, in a manufacturing organisation, an increase of 7% in labour cost is more troublesome than an 18% increase in stationary expenses.

(b) Management by Exception:

Management by exception or control by exception is an important principle of management control. According to this principle, an attempt to control everything results in controlling nothing. Thus only the important deviations which exceed the prescribed limit should be brought to the notice of management. Thus, if plans provide for 3% increase in labour cost, deviations beyond 3% alone should be brought to the notice of the management.

Advantages of Critical Point Control and Management by Exception are as follows:

(i) Since managers deal only with important deviations, it results in saving time and efforts.

(ii) It helps in identifying important deviations which need timely action to keep the organisation at the correct path.

(iii) By handing over the routine problems to the subordinates, management by exception facilitates delegation of authority and helps in increasing morale of employees.

(iv) It ensures better utilization of managerial expertise by focusing managerial attention only on important areas.

After identifying the deviations, various causes for these deviations are analyzed. The main causes can be structural drawbacks, shortage of resources, environmental factors beyond organisational control, unrealistic standards, defective process etc. Exact cause or causes of deviation must be identified correctly in order to take effective corrective measures.

#### 5. Taking Corrective Action:

The last step in the process of controlling involves taking corrective action. If the deviations are within acceptable limits, no corrective measure is required. However, if the deviations exceed acceptable limits, they should be immediately brought to the notice of the management for taking corrective measures, especially in the important areas.

## Get Authority to Operate (MC Number)

In general, companies that do the following are required to have interstate Operating Authority (MC number) in addition to a DOT number:

• Transport passengers in interstate commerce (for a fee or other compensation, whether direct or indirect)
• Transport federally-regulated commodities owned by others or arranging for their transport, (for a fee or other compensation, in interstate commerce)

FMCSA operating authority is often identified as an "MC," "FF," or "MX" number, depending on the type of authority that is granted. Unlike the USDOT Number application process, a company may need to obtain multiple operating authorities to support its planned business operations. Operating Authority dictates the type of operation a company may run and the cargo it may carry.

### Who Does Not Need Authority?

All of this also dictates the level of insurance/financial responsibilities a company must maintain. Carriers not required to have operating authority include:

• Private carriers (carriers that transport their own cargo)
• “For-hire" carriers that exclusively haul exempt commodities (cargo that is not federally regulated)
• Carriers that operate exclusively within a federally designated "commercial zone" that is exempt from interstate authority rules. A commercial zone is, for example, a geographic territory that includes multiple states bordering on a major metropolitan city, such as Virginia/Maryland/Washington, DC

### Types of Authority

The type(s) of Operating Authority requested will impact the type and level of insurance that is required by FMCSA. Therefore, carefully select only the type(s) of Operating Authority relevant to the business. FMCSA does not refund application fees. Descriptions of the different types of interstate Operating Authority are as follows:

### Filing Fees

NOTE: Separate fees must be submitted for each kind of authority sought. Please note that there are NO REFUNDS for mistaken applications.

### Apply for Authority

#### Unified Registration System (first-time applicants)

First-time applicants, who have never registered with FMCSA before and have not been issued a US DOT number, need to register via the new Unified Registration System as of December 12, 2015. To register, click here.

Applicants who are already registered for a USDOT number, or who are applying for an additional authority, can apply online using FMCSA’s legacy registration system with a credit card.

#### Credit Card via US Mail

If you are already registered with FMCSA, but wish to add an operating authority, you can register using a form and credit card via US Mail. Credit card payments and completed applications should be mailed to:

1200 New Jersey Avenue SE, MC-RS
Room W65-206
Washington, DC 20590

#### Check via US Mail

If you are already registered with FMCSA, but wish to add an operating authority, you can register using a form and a check via US Mail. Payment may be combined. Applications and other filings accompanied by improper fees will not be accepted. Please note: submitting payment by check through the mail may delay the processing of your form by 6-8 weeks, due to mail times before and after the check is cashed by the bank. We don’t recommend this method.

Checks should be made payable to the Federal Motor Carrier Safety Administration.

Applications and payments should be sent to:

P. O. BOX 6200-33
Portland, OR 97228-6200

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## What do mathematics graduates do?

Top jobs for mathematics graduates include programming and software development professionals (11%), finance and investment analyst and adviser (9%), secondary education teaching professionals (9%), business and related associate professionals (7%) and chartered or certified accountant (6%).

Type of workPercentage
Information technology20.6
Education professionals12.3
Secretarial and numerical clerks8.1
Other19.4

For a detailed breakdown of what mathematics graduates are doing after graduation, see What do graduates do?

### Financial management

Being able to effectively manage your finances is critical. You will need to be able to forecast your cash flow and sales, as well as, monitor your profit and loss. You will also need to declare your income to the Australian Tax Office.

### Marketing, sales and customer service

It is important to be able to promote your products or services effectively. Providing good customer service and having a marketing strategy in place will help you to generate sales.

### Communication and negotiation

You will need to communicate and negotiate with your suppliers, potential investors, customers and employees. Having effective written and verbal communication skills will help you to build good working relationships. Every communication should reflect the image you are trying to project.

If you employ people, leadership will be a key skill. You must be able to motivate your staff in order to get the best out of them and improve productivity. Allocate time to mentor and coach your employees.

### Project management and planning

Starting a business means you will have to manage a range of projects, such as setting up a website, arranging the fit-out of your premises and developing a range of policies and procedures. Knowing how to effectively manage your resources, including time, money and staff will help you to achieve your goals.

### Delegation and time management

Failure to delegate is a trap many business owners fall into usually because they are reluctant to let go of control. Managing your time effectively may mean delegating responsibility to someone else in the business or outsourcing. Identifying who you can delegate tasks to, allows you to concentrate on those tasks that generate revenue.

### Problem solving

However much you plan, you will encounter problems in your business. This means you need to be able to make good decisions, sometimes under pressure.

## Contents

In corporate finance and the accounting profession, financial modeling typically entails financial statement forecasting usually the preparation of detailed company-specific models used for decision making purposes [1] and financial analysis.

/ stock valuation - especially via discounted cash flow, but including other valuation approaches and management decision making ("what is" "what if" "what has to be done" [4] ) , including cost of capital (i.e. WACC) calculations / ratio analysis (including of operating- and finance leases, and R&D)
• Revenue related: forecasting, analysis
• Credit decisioning: Credit analysis and Consumer credit risk impairment- and provision-modelling and treasury management asset and liability management
• Management accounting: Activity-based costing, Profitability analysis, Cost analysis

To generalize [ citation needed ] as to the nature of these models: firstly, as they are built around financial statements, calculations and outputs are monthly, quarterly or annual secondly, the inputs take the form of "assumptions", where the analyst specifies the values that will apply in each period for external / global variables (exchange rates, tax percentage, etc. may be thought of as the model parameters), and for internal / company specific variables (wages, unit costs, etc. ). Correspondingly, both characteristics are reflected (at least implicitly) in the mathematical form of these models: firstly, the models are in discrete time secondly, they are deterministic. For discussion of the issues that may arise, see below for discussion as to more sophisticated approaches sometimes employed, see Corporate finance § Quantifying uncertainty and Financial economics § Corporate finance theory.

Modelers are often designated "financial analyst" (and are sometimes referred to (tongue in cheek) as "number crunchers"). Typically, the modeler will have completed an MBA or MSF with (optional) coursework in "financial modeling". Accounting qualifications and finance certifications such as the CIIA and CFA generally do not provide direct or explicit training in modeling. [ citation needed ] At the same time, numerous commercial training courses are offered, both through universities and privately. For the components and steps of business modeling here, see the list for "Equity valuation" under Outline of finance § Discounted cash flow valuation see also Valuation using discounted cash flows § Determine cash flow for each forecast period for further discussion and considerations.

Although purpose-built business software does exist (see also Fundamental Analysis Software), the vast proportion of the market is spreadsheet-based this is largely since the models are almost always company-specific. Also, analysts will each have their own criteria and methods for financial modeling. [5] Microsoft Excel now has by far the dominant position, having overtaken Lotus 1-2-3 in the 1990s. Spreadsheet-based modelling can have its own problems, [6] and several standardizations and "best practices" have been proposed. [7] "Spreadsheet risk" is increasingly studied and managed [7] see model audit.

One critique here, is that model outputs, i.e. line items, often inhere "unrealistic implicit assumptions" and "internal inconsistencies". [8] (For example, a forecast for growth in revenue but without corresponding increases in working capital, fixed assets and the associated financing, may imbed unrealistic assumptions about asset turnover, leverage and/or equity financing. See Sustainable growth rate § From a financial perspective.) What is required, but often lacking, is that all key elements are explicitly and consistently forecasted. Related to this, is that modellers often additionally "fail to identify crucial assumptions" relating to inputs, "and to explore what can go wrong". [9] Here, in general, modellers "use point values and simple arithmetic instead of probability distributions and statistical measures" [10] — i.e., as mentioned, the problems are treated as deterministic in nature — and thus calculate a single value for the asset or project, but without providing information on the range, variance and sensitivity of outcomes. [11] (See Valuation using discounted cash flows § Determine equity value.) Other critiques discuss the lack of basic computer programming concepts. [12] More serious criticism, in fact, relates to the nature of budgeting itself, and its impact on the organization [13] [14] (see Conditional budgeting § Criticism of budgeting).

In quantitative finance, financial modeling entails the development of a sophisticated mathematical model. [ citation needed ] Models here deal with asset prices, market movements, portfolio returns and the like. A general distinction [ citation needed ] is between: "quantitative financial management", models of the financial situation of a large, complex firm "quantitative asset pricing", models of the returns of different stocks "financial engineering", models of the price or returns of derivative securities "quantitative corporate finance", models of the firm's financial decisions.

Relatedly, applications include:

and calculation of their "Greeks"
• Other derivatives, especially interest rate derivatives, credit derivatives and exotic derivatives
• Modeling the term structure of interest rates (bootstrapping / multi-curves, short-rate models, HJM) and credit spreads and provisioning prediction problems [15] (Financial risk modeling) and value at risk[16] , CVA, as well as the various XVA : Dynamic financial analysis (DFA), UIBFM, investment modeling

Modellers are generally referred to as "quants" (quantitative analysts), and typically have advanced (Ph.D. level) backgrounds in quantitative disciplines such as statistics, physics, engineering, computer science, mathematics or operations research. Alternatively, or in addition to their quantitative background, they complete a finance masters with a quantitative orientation, [17] such as the Master of Quantitative Finance, or the more specialized Master of Computational Finance or Master of Financial Engineering the CQF is increasingly common.

Although spreadsheets are widely used here also (almost always requiring extensive VBA) custom C++, Fortran or Python, or numerical analysis software such as MATLAB, are often preferred, [17] particularly where stability or speed is a concern. MATLAB is often used at the research or prototyping stage [ citation needed ] because of its intuitive programming, graphical and debugging tools, but C++/Fortran are preferred for conceptually simple but high computational-cost applications where MATLAB is too slow Python is increasingly used due to its simplicity and large standard library. Additionally, for many (of the standard) derivative and portfolio applications, commercial software is available, and the choice as to whether the model is to be developed in-house, or whether existing products are to be deployed, will depend on the problem in question. [17] See Quantitative analysis (finance) § Library quantitative analysis.

The complexity of these models may result in incorrect pricing or hedging or both. This Model risk is the subject of ongoing research by finance academics, and is a topic of great, and growing, interest in the risk management arena. [18]

Criticism of the discipline (often preceding the financial crisis of 2007–08 by several years) emphasizes the differences between the mathematical and physical sciences, and finance, and the resultant caution to be applied by modelers, and by traders and risk managers using their models. Notable here are Emanuel Derman and Paul Wilmott, authors of the Financial Modelers' Manifesto. Some go further and question whether mathematical- and statistical modeling may be applied to finance at all, at least with the assumptions usually made (for options for portfolios). In fact, these may go so far as to question the "empirical and scientific validity. of modern financial theory". [19] Notable here are Nassim Taleb and Benoit Mandelbrot. [20] See also Mathematical finance § Criticism and Financial economics § Challenges and criticism.

## 3: General Business Management Applications (Get Your Motor Running) - Mathematics

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