Mathematics for Management

Managerial Mathematics

By Dr. Megan Jorgensen

Together with financial accounting, managerial accounting is taught as an introductory course in most accounting, finance and other Bachelor of Commerce majors and realted programs. The expression CMA (Certified Management Accountant) represents a professional accounting designation for accountants specializing in managerial and corporate areas. For example, an associated professional order, the CIMA (Chartered Institute of Management Accountants), released a report on the Balanced Scorecard (BSC). The BSC, together with the just-in-time inventory and FIFO (first-in-first-out) methods, if and when prescribed by the GAAP (Generally Accepted Accounting Principles) help to keep a commercial enterprise on track.

Academic prerequisites to managerial accounting usually include at least two of the following: Calculus I, Calculus II and Linear Algebra, as well as financial accounting. Conversely, a general management graduate diploma would require a specialized mathematical course. Such classes shed light on formulas on how to calculate the real rate of return, the interest rate on promissory notes and other topics in mathematics for management and finance. Most mathematics, statistics and accounting textbooks contain solutions to quantitative problems, which greatly aids learning. Also, successfully completing actuarial lectures without appropriate practicing is virtually impossible.

Can mathematics prevent us from seeing ghost cities? Photo by Elena.

To illustrate, in a book compiled by Lau (2008), the present value of an interest-bearing promissory note is explained. The face value, or principal, of promissory notes can be derived using the following formula:

P = S/1+rt

Where,

P= present value of note when issued

S = maturity value

R = interest rate

T = interest period

References:

• Lau, H. (2008), selected and arranged by. Mathematics for Management: Second Custom Edition for McGill University. Pearson Learning Solutions: Boston, MA.
• Qu, S. Q., Cooper, D. J., & Ezzamel, M. (2010). Creating and popularizing a global management accounting idea: The case of the Balanced Scorecard. Chartered Institute of Management Accountants, 6 (3): 1-8.

Copyright © 2015 Megan Jorgensen. All rights reserved.