Mathematics & Business & the Social Sciences

Anyone selling a product or providing a service uses basic arithmetic to determine how much money they take in and how much money they pay out. When the expenses are less than the revenues, they make a profit. This simple accounting principle becomes more complex as the items associated with the various components increases in complexity. Revenues can be based on cash received, or they may be placed on accounts receivable. Expenses and cost of goods sold similar can be paid for directly, or registered as accounts payable. Inventory valuation comes into play, and methods of determining inventory (LIFO vs. FIFO) can have long-term effects on a business. Eventually, financial statements are prepared in order to provide a way of determining where the company stands and how the company is doing relative to other organizations.

There are two primary financial statements: the income statement and the balance sheet. The income statement identifies the companies revenues, then subtracts the expenses associated with producing that revenue. When the cost

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ided by the cost of the project. Risk factors can be added in as multipliers in the numerator, resulting in a more accurate forecast. Rates of return can be compared for various projects, and the project with the highest rate of return is then selected (Brown & Kritzman, 1990, p. 201). When companies or others use historical information to predict future performance, linear regression is typically applied. Linear regression fits an equation to a series of points; the resulting graph can then be used to predict future performance. This approach is often used in predicting sales, prices and similar types of information (Anderson, et al, 1990, p. 525). Tests regarding the significance of the information and the expected accuracy of the results have been developed in conjunction with linear regression to provide analysts with a better idea of the accuracy of their data. Linear regression can be quite complex, with many equations (multiple linear regression), but the rapid advances in computers makes this a valuable information tool. The study of economics makes extensive use of mathematics, particularly in the area of supply and demand. Supply and demand are fundamentals of economics and apply to both macroeconomics and microe
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Approximate Word count = 1609
Approximate Pages = 6 (250 words per page)

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