Basic Mathematical Concepts in Business
- Ratios
A ratio is a comparison of two numbers by division. It helps to determine the relationship between two quantities.
The ratio of to can be expressed as:
- Rates
A rate, like a ratio, is a comparison of two quantities, but the quantities may have different units of measure. For example, speed is measured in km/hr, comparing distance and time.
A rate that has a denominator of 1 is called a unit rate.
The rate of change of a given quantity is used to measure how one quantity changes in relation to another:
- Proportions
A proportion is an equation that states that two ratios are equal.
In the proportion , with and , the four numbers are referred to as the terms of the proportion.
The first and last terms ( and ) are called the extremes, and the second and third terms ( and ) are called the means.
For three quantities , , and , if:
This is called the mean proportion between and .
- Compound Proportions
A compound proportion is when one variable quantity depends on two or more other variable quantities.
Two quantities and are said to be in inverse proportion if an increase in causes a proportional decrease in :
If and vary directly (in direct proportion), then:
- Percentages
A percentage is a number or ratio expressed as a fraction of 100. It is used widely in business to describe profit margins, discounts, and markups.
The difference between a product’s selling price and its cost is called markup: