xx FUNDAMENTALS OF BUSINESS MATHEMATICS C3

MATHEMATICAL TABLES
Perpetuity
Present value of £1 per annum, payable or receivable in perpetuity, commencing in one
year, discounted at r% per annum.
1
PV 
r
Note that logarithm tables are also available when you sit your assessment.
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 1
Basic Mathematics
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 1
Basic Mathematics

LEARNING OUTCOMES
You will probably be familiar with the content of this chapter from your schooldays.
Basic mathematics, as its name implies, underpins the rest of the subjects studied in
Business Mathematics – and, indeed, the rest of your CIMA studies. After completing
this chapter you should be able to:
䉴 demonstrate the order of operations in formulae, including the use of brackets, nega-
tive numbers, powers and roots;
䉴 calculate percentages and proportions;
䉴 calculate answers to an appropriate number of significant figures or decimal places;
䉴 solve simple equations, including two-variable simultaneous equations and quadratic
equations;
䉴 prepare graphs of linear and quadratic equations;
䉴 manipulate inequalities.

1.1 Introduction
In this first chapter, a number of concepts are introduced that are fundamental to many
areas of business mathematics. We begin by defining some key words and phrases.

1.2 Mathematical operations and brackets

The basic mathematical operations are addition, subtraction, multiplication and division;
and there is a very important convention about how we write down exactly what operations
are to be carried out and in what order. Brackets are used to clarify the order of operations
and are essential when the normal priority of operations is to be broken. The order is:
● work out the values inside brackets first;
● powers and roots (see Section 1.5);
● multiplication and division are next in priority;
● finally, addition and subtraction.

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BASIC MATHEMATICS
For example, suppose you want to add 2 and 3 and then multiply by 4. You might write
this as

23 4

However, the above rule means that the multiplication will take priority over the addition.
What you have written will be interpreted as an instruction to multiply 3 by 4 and then add 2.
It would be useful at this point to briefly digress and check your calculator. Type
‘2  3  4 ’ into it. If the answer is 14, you have a scientific calculator that obeys math-
ematical priorities. If the answer is 20, your calculator is non-scientific and perhaps will
not be suitable for your CIMA studies.
Returning to the main problem, if you want to add 2 to 3 and then multiply by 4, you
must use brackets to give priority to the addition – to ensure that it takes place first. You
should write (2  3)  4. The contents of the bracket total 5, and this is then multiplied
by 4 to give 20.

Example 1.2.1
Evaluate the following:

(a) 568
(b) (3  1)  2
(c) 97÷2
(d) (4  5)/10
(e) 5782
(f) (9  1)  (6  4)

Solution
(a) 6  8 takes priority, then add 5, so 5  6  8  48  5  53
(b) Work out the bracket first, then multiply by 2; 3  1  4, so (3  1)  2  8
(c) 7 ÷ 2 takes priority, and is then subtracted from 9; 9  3.5  5.5
(d) Work out the bracket first, then divide by 10; 4  5  9, and 9/10  0.9
(e) The multiplication of 7  8 takes priority, giving 56; 5  56  2  59
(f) Work out the brackets first – the order is unimportant but it is usual to work from left to right; 9  1  8,
and 6  4  10, so 8  10  80

1.3 Different types of numbers

A whole number such as 5, 0 or 5 is called an integer, whereas numbers that contain
parts of a whole number are either fractions – such as 34 – or decimals – such as 0.75.
Any type of number can be positive or negative. If you add a positive number to some-
thing, the effect is to increase it whereas, adding a negative number has the effect of reduc-
ing the value. If you add B to any number A, the effect is to subtract B from A. The rules
for arithmetic with negative numbers are as follows:
● adding a negative is the same as subtracting, that is A  (B)  A  B;
● subtracting a negative is the same as adding, that is A  (B)  A  B;
● if you multiply or divide a positive and a negative, the result is negative, that is
()  () and ()  () and ()  () and ()  () are all negative;
● if you multiply or divide two negatives, the result is positive, that is ()  () and
()  () are both positive.
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BASIC MATHEMATICS
Notice that brackets are often used for clarity when a negative number follows one of
the mathematical operators like  or , but they are not strictly necessary.

Example 1.3.1
Evaluate the following:

(a) 9  7  (2)
(b) (5  8)  (6)
(c) 12  8 ÷ (4)
(d) (4  16)/(2)
(e) (17  6)  (8  3)
(f) 7  (2  20)/(6  4)

Solution
(a) Multiplication takes priority; 7  (2)  14, so 9  7  (2)  9  (14)  9  14  23
(b) Work out the bracket first; (5  8)  (6)  3  (6)  18
(c) Division takes priority; 12  8 ÷ (4)  12  (2)  12  2  14
(d) Work out the bracket first; (4  16)/(2)  (12)/(2)  6
(e) (17  6)  (8  3)  11  5  55
(f) Brackets first, then the division, and only then subtract the result from 7; 7  (2  20) ÷ (6  4) 
7  (18) ÷ 2  7  (9)  7  9  16

1.4 Rounding
Quite often, numbers have so many digits that they become impractical to work with and
hard to grasp. This problem can be dealt with by converting some of the digits to zero in a
variety of ways.

1.4.1 Rounding to the nearest whole number

For example, 78.187  78 to the nearest whole number. The only other nearby whole
number is 79 and 78.187 is nearer to 78 than to 79. Any number from 78.0 to 78.49 will
round down to 78 and any number from 78.5 to 78.99 will round up to 79.
The basic rules of rounding are that:
1. digits are discarded (i.e. turned into zero) from right to left;
2. reading from left to right, if the first digit to be discarded is in the range 0–4, then the
previous retained digit is unchanged; if the first digit is in the range 5–9 then the
previous digit goes up by one.
Depending on their size, numbers can be rounded to the nearest whole number, or 10
or 100 or 1,000,000, and so on. For example, 5,738  5,740 to the nearest 10; 5,700 to
the nearest 100; and 6,000 to the nearest 1,000.

1.4.2 Significant figures

For example, 86,531 has five digits but we might want a number with only three. The ‘31’
will be discarded. Reading from the left the first of these is 3, which is in the 0–4 range, so