x FUNDAMENTALS OF BUSINESS MATHEMATICS C3

THE CIMA LEARNING SYSTEM

● Solutions. Avoid the temptation merely to ‘audit’ the solutions provided. It is an illusion
to think that this provides the same benefits as you would gain from a serious attempt
of your own. However, if you are struggling to get started on a question you should read
the introductory guidance provided at the beginning of the solution, where provided,
and then make your own attempt before referring back to the full solution.
Having worked through the chapters you are ready to begin your final preparations for the
computer-based assessments. The final section of the CIMA Learning System provides you
with the guidance you need. It includes the following features:
● A brief guide to revision technique.
● A note on the format of the computer-based assessments. You should know what
to expect when you tackle the real computer-based assessments, and in particular the
number of questions to attempt.
● Guidance on how to tackle the computer-based assessments itself.
● A table mapping revision questions to the syllabus learning outcomes allowing you to
quickly identify questions by subject area.
● Revision questions. These are of computer-based assessments standard and should be tack-
led in computer-based assessments conditions, especially as regards the time allocation.
● Solutions to the revision questions.
Two mock computer-based assessments. You should plan to attempt these just before the
date of the real computer-based assessments. By this stage your revision should be com-
plete and you should be able to attempt the mock computer-based assessments within the
time constraints of the real computer-based assessments.
If you work conscientiously through the CIMA Learning System according to the guide-
lines above you will be giving yourself an excellent chance of success in your computer-
based assessments. Good luck with your studies!

Guide to the Icons used within this Text

Key term or definition

Exam tip or topic likely to appear in the computer-based assessments

Exercise

Question

Solution

Comment or Note

Discussion points

Equations to learn
 FUNDAMENTALS OF BUSINESS MATHEMATICS xi

Study technique

THE CIMA LEARNING SYSTEM

Passing exams is partly a matter of intellectual ability, but however accomplished you are
in that respect you can improve your chances significantly by the use of appropriate study
and revision techniques. In this section we briefly outline some tips for effective study dur-
ing the earlier stages of your approach to the computer-based assessments. Later in the text
we mention some techniques that you will find useful at the revision stage.

Planning
To begin with, formal planning is essential to get the best return from the time you spend
studying. Estimate how much time in total you are going to need for each paper you are
studying for the Certificate in Business Accounting. Remember that you need to allow
time for revision as well as for initial study of the material. The amount of notional study
time for any paper is the minimum estimated time that students will need to achieve the
specified learning outcomes set out below. This time includes all appropriate learning
activities, for example, face-to-face tuition, private study, directed home study, learning in
the workplace, revision time, etc. You may find it helpful to read Better Exam Results: a
Guide for Business and Accounting Students by S. A. Malone, Elsevier, ISBN: 075066357X.
This book will provide you with proven study techniques. Chapter by chapter it covers the
building blocks of successful learning and examination techniques.
The notional study time for the Certificate in Business Accounting paper
Fundamentals of Business Mathematics is 130 hours. Note that the standard amount
of notional learning hours attributed to one full-time academic year of approximately 30
weeks is 1,200 hours.
By way of example, the notional study time might be made up as follows:

Hours
Face-to-face study: up to 40
Personal study: up to 65
‘Other’ study – e.g. learning in the workplace, revision, etc.: up to 25
130

Note that all study and learning-time recommendations should be used only as a guideline
and are intended as minimum amounts. The amount of time recommended for face-to-face
tuition, personal study and/or additional learning will vary according to the type of course
undertaken, prior learning of the student, and the pace at which different students learn.
Now split your total time requirement over the weeks between now and the exam. This
will give you an idea of how much time you need to devote to study each week. Remember
to allow for holidays or other periods during which you will not be able to study (e.g.
because of seasonal workloads).
With your study material before you, decide which chapters you are going to study in
each week, and which weeks you will devote to revision and final question practice.
Prepare a written schedule summarising the above – and stick to it!
The amount of space allocated to a topic in the Learning System is not a very good
guide as to how long it will take you. For example, the material relating to Section A ‘Basic
Mathematics’ and Section C ‘Summarising and Analysing Data’ both account or 15% of
xii FUNDAMENTALS OF BUSINESS MATHEMATICS C3
THE CIMA LEARNING SYSTEM
the syllabus, but the latter has more pages because there are more illustrations, which take
up more space. The syllabus weighting is the better guide as to how long you should spend
on a syllabus topic. It is essential to know your syllabus. As your course progresses you will
become more familiar with how long it takes to cover topics in sufficient depth. Your time-
table may need to be adapted to allocate enough time for the whole syllabus.

Tips for effective studying

1. Aim to find a quiet and undisturbed location for your study, and plan as far as possible
to use the same period of time each day. Getting into a routine helps to avoid wast-
ing time. Make sure that you have all the materials you need before you begin so as to
minimise interruptions.
2. Store all your materials in one place, so that you do not waste time searching for items
around your accommodation. If you have to pack everything away after each study
period, keep them in a box, or even a suitcase, which will not be disturbed until the
next time.
3. Limit distractions. To make the most effective use of your study periods you should
be able to apply total concentration, so turn off all entertainment equipment, set your
phones to message mode, and put up your ‘do not disturb’ sign.
4. Your timetable will tell you which topic to study. However, before diving in and becom-
ing engrossed in the finer points, make sure you have an overall picture of all the areas
that need to be covered by the end of that session. After an hour, allow yourself a short
break and move away from your Learning System. With experience, you will learn to
assess the pace you need to work at.
5. Work carefully through a chapter, making notes as you go. When you have covered a
suitable amount of material, vary the pattern by attempting a practice question. When
you have finished your attempt, make notes of any mistakes you made, or any areas
that you failed to cover or covered only skimpily.
6. Make notes as you study, and discover the techniques that work best for you. Your
notes may be in the form of lists, bullet points, diagrams, summaries, ‘mind maps’, or
the written word, but remember that you will need to refer back to them at a later date,
so they must be intelligible. If you are on a taught course, make sure you highlight any
issues you would like to follow up with your lecturer.
7. Organise your notes. Make sure that all your notes, calculations etc can be effectively
filed and easily retrieved later.

Computer-Based Assessments
CIMA uses computer-based assessments (CBAs) for all subjects for the Certificate in
Business Accounting. The website says
Objective questions are used. The most common type is ‘multiple choice’, where you have to choose the cor-
rect answer from a list of possible answers, but there are a variety of other objective question types that can
be used within the system. These include true/false questions, matching pairs of text and graphic, sequencing
and ranking, labelling diagrams and single and multiple numeric entry.
Candidates answer the questions by either pointing and clicking the mouse, moving objects around the
screen, typing numbers, or a combination of these responses. Try the online demo at http://www.cimaglobal
.com to see how the technology works.
 FUNDAMENTALS OF BUSINESS MATHEMATICS xiii

THE CIMA LEARNING SYSTEM

The CBA system can ensure that a wide range of the syllabus is assessed, as a pre-determined number
of questions from each syllabus area (dependent upon the syllabus weighting for that particular area) are
selected in each assessment.

In every chapter of this Learning System we have introduced these types of questions
but obviously we have to label answers A, B, C etc. rather than using click boxes. For
convenience, we have retained quite a lot of questions where an initial scenario leads to
a number of sub-questions. There will be questions of this type in the CBA but they will
rarely have more than three sub-questions. In all such cases the answer to one part does
not hinge upon a prior answer.

Fundamentals of Business Mathematics and

Computer-Based Assessments
The computer-based assessments for Fundamentals Business Mathematics is a 2-hour
computer-based assessments comprising 45 compulsory questions, with one or more parts.
Single part questions are generally worth 1–2 marks each, but two and three part questions
may be worth 4 or 6 marks. There will be no choice and all questions should be attempted
if time permits. CIMA are continuously developing the question styles within the CBA
system and you are advised to try the on-line website demo at www.cimaglobal.com, to
both gain familiarity with assessment software and examine the latest style of questions
being used.

Fundamentals of Business Mathematics

Syllabus outline
The Syllabus comprises:
Topic and study weighting

A Basic Mathematics 15%

B Probability 15%
C Summarising and Analysing Data 15%
D Inter-relationships between variables 15%
E Forecasting 15%
F Financial Mathematics 15%
G Spreadsheets 10%

Learning Aims
This syllabus aims to test the candidate’s ability to:
● demonstrate the use of basic mathematics, including formulae and ratios;
● identify reasonableness in the calculation of answers;
● demonstrate the use of probability where risk and uncertainty exist;
● apply techniques for summarising and analysing data;
● calculate correlation coefficients for bivariate data and apply the technique of simple
regression analysis;
xiv FUNDAMENTALS OF BUSINESS MATHEMATICS C3
THE CIMA LEARNING SYSTEM
● demonstrate techniques used for forecasting;
● apply financial mathematical techniques;
● apply spreadsheets to facilitate the presentation of data, analysis of univariate and bivari-
ate data and use of formulae.

Assessment strategy
There will be a computer-based assessments of 2 hours duration, comprising 45 compul-
sory questions, each with one or more parts.
A variety of objective test question styles and types will be used within the assessment.

Learning outcomes and indicative syllabus

content
A Basic Mathematics – 15%
Learning Outcomes
On completion of their studies students should be able to:
(i) demonstrate the order of operations in formulae, including brackets, powers and
roots;
(ii) calculate percentages and proportions;
(iii) calculate answers to appropriate number of decimal places or significant figures;
(iv) solve simple equations, including two variable simultaneous equations and quadratic
equations;
(v) prepare graphs of linear and quadratic equations.

Indicative syllabus content

● Use of formulae, including negative powers as in the formula for the learning curve.
● Percentages and ratios.
● Rounding of numbers.
● Basic algebraic techniques and solution of equations, including simultaneous equations
and quadratic equations.
● Manipulation of inequalities.

B Probability – 15%
Learning outcomes
On completion of their studies students should be able to:
(i) calculate a simple probability;
(ii) demonstrate the addition and multiplication rules of probability;
(iii) calculate a simple conditional probability;
(iv) calculate an expected value;
(v) demonstrate the use of expected value tables in decision making;
 FUNDAMENTALS OF BUSINESS MATHEMATICS xv

THE CIMA LEARNING SYSTEM

(vi) explain the limitations of expected values;
(vii) explain the concepts of risk and uncertainty.

Indicative syllabus content

● The relationship between probability, proportion and percent.
● Addition and multiplication rules in probability theory.
● Venn diagrams.
● Expected values and expected value tables.
● Risk and uncertainty.

C Summarising and Analysing Data – 15%

Learning Outcomes
On completion of their studies students should be able to:
(i) explain the difference between data and information;
(ii) identify the characteristics of good information;
(iii) tabulate data and prepare histograms;
(iv) calculate for both ungrouped and grouped data: arithmetic mean, median, mode,
range, variance, standard deviation and coefficient of variation;
(v) explain the concept of a frequency distribution;
(vi) prepare graphs/diagrams of normal distribution, explain its properties and use tables
of normal distribution;
(vii) apply the Pareto distribution and the ‘80:20 rule’;
(viii) explain how and why indices are used;
(ix) calculate indices using either base or current weights;
(x) apply indices to deflate a series.

Indicative syllabus content

● Data and information.
● Tabulation of data.
● Graphs and diagrams: scatter diagrams, histograms, bar charts and ogives.
● Summary measures of central tendency and dispersion for both grouped and ungrouped
data.
● Frequency distributions.
● Normal distribution, the Pareto distribution and ‘80:20 rule’.
● Index numbers.

D Inter-relationships between Variables – 15%

Learning outcomes
On completion of their studies students should be able to:
(i) prepare a scatter diagram;
(ii) calculate the correlation coefficient and the coefficient of determination between two
variables;
xvi FUNDAMENTALS OF BUSINESS MATHEMATICS C3
THE CIMA LEARNING SYSTEM
(iii) calculate the regression equation between two variables;
(iv) apply the regression equation to predict the dependent variable, given a value of the
independent variable.

Indicative syllabus content

● Scatter diagrams and the correlation coefficient
● Simple linear regression

E Forecasting – 15%
Learning outcomes
On completion of their studies students should be able to:
(i) prepare a time series graph;
(ii) identify trends and patterns using an appropriate moving average;
(iii) identify the components of a time series model;
(iv) prepare a trend equation using either graphical means or regression analysis;
(v) calculate seasonal factors for both additive and multiplicative models and explain
when each is appropriate;
(vi) calculate predicted values, given a time series model;
(vii) identify the limitations of forecasting models.

Indicative syllabus content

● Time series analysis – graphical analysis.
● Trends in time series – graphs, moving averages and linear regression.
● Seasonal variations using both additive and multiplicative models.
● Forecasting and its limitations.

F Financial Mathematics – 15%

Learning Outcomes
On completion of their studies students should be able to:
(i) calculate future values of an investment using both simple and compound interest;
(ii) calculate an annual percentage rate of interest given a monthly or quarterly rate;
(iii) calculate the present value of a future cash sum using formula and CIMA Tables;
(iv) calculate the present value of an annuity and a perpetuity using formula and CIMA
Tables;
(v) calculate loan/mortgage repayments and the value of the loan/mortgage outstanding;
(vi) calculate the future value of regular savings and/or the regular investment needed
to generate a required future sum using the formula for the sum of a geometric
progression;
(vii) calculate the net present value (NPV) and internal rate of return (IRR) of a project
and explain whether and why it should be accepted.
 FUNDAMENTALS OF BUSINESS MATHEMATICS xvii

Indicative syllabus content

THE CIMA LEARNING SYSTEM

● Simple and compound interest.
● Annuities and perpetuities.
● Loans and mortgages.
● Sinking funds and savings funds.
● Discounting to find NPV and IRR and interpretation of NPV and IRR.

G Spreadsheets – 10%
Learning Outcomes
On completion of their studies students should be able to:
● explain the features and functions of spreadsheet software;
● explain the use and limitations of spreadsheet software in business;
● apply spreadsheet software to the normal work of a Chartered Management Accountant.

Indicative syllabus content

● Features and functions of commonly used spreadsheet software: workbook, worksheet,
rows, columns, cells, data, text, formulae, formatting, printing, graphics and macros.
Note: Knowledge of Microsoft Excel type spreadsheet vocabulary/formulae syntax is
required. Formulae tested will be that which is constructed by users rather than prepro-
grammed formulae.
● Advantages and disadvantages of spreadsheet software, when compared to manual analy-
sis and other types of software application packages.
● Use of spreadsheet software in the day-to-day work of the Chartered Management
Accountant: budgeting, forecasting, reporting performance, variance analysis, what-if
analysis and discounted cashflow calculations.
This page intentionally left blank
Mathematical Tables

LINEAR REGRESSION AND CORRELATION

The linear regression equation of y on x is given by:
Y  a  bX or Y  Y  b( X  X )

where
Covariance(XY ) nΣ XY  (Σ X )(ΣY )
b 
Variance(X ) nΣ X 2  (Σ X )2

and
a  Y  bX

or solve
∑ Y  na  b ∑ X
∑ XY  a ∑ X  b ∑ X 2
Coefficient of Correlation
Covariance( XY ) n ∑ XY  ( ∑ X )( ∑ Y )
r 
Var(OX ) ⋅ Var(Y ) (n ∑ X 2  ( ∑ X )2 )(n ∑ Y 2  ( ∑ Y )2 )

6∑ d 2
R (rank)  1 
n(n 2  1)

FINANCIAL MATHEMATICS
Compound Interest (Values and Sums)
Future Value of S, of a sum X, invested for n periods, compounded at r% interest
S  X [1  r ]n

Annuity
Present value of an annuity of £1 per annum receivable or payable for n years, commenc-
ing in one year, discounted at r% per annum.
1⎡ 1 ⎤
PV  ⎢1  ⎥
r ⎢⎣ [1  r ]n ⎥⎦

xix