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The Economist: Numbers Guide

The Essentials of Business Numeracy

By Richard Stutely, The Economist
13-minute read
Audio available
The Economist: Numbers Guide: The Essentials of Business Numeracy by Richard Stutely, The Economist

The Economist: Numbers Guide (1991) explores a variety of mathematical tools that are exceptionally useful across a range of business environments. These blinks reveal just how simple it is to manage risk by quantifying it, helping improve decision making in the process. The book’s mathematical notions are explained at a basic level, so no prior math knowledge is required.

  • Entrepreneurs wondering how to apply mathematical ideas to their business
  • Anyone seeking reliable tools for making decisions in uncertain business situations

The Economist is an English-language weekly magazine known for its global coverage and its liberal economic stance. The Economist: Numbers Guide is part of a book series including Guide to Analyzing Companies, Guide to Financial Markets and Guide to Management Ideas.

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The Economist: Numbers Guide

The Essentials of Business Numeracy

By Richard Stutely, The Economist
  • Read in 13 minutes
  • Audio & text available
  • Contains 8 key ideas
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The Economist: Numbers Guide: The Essentials of Business Numeracy by Richard Stutely, The Economist
Synopsis

The Economist: Numbers Guide (1991) explores a variety of mathematical tools that are exceptionally useful across a range of business environments. These blinks reveal just how simple it is to manage risk by quantifying it, helping improve decision making in the process. The book’s mathematical notions are explained at a basic level, so no prior math knowledge is required.

Key idea 1 of 8

Percentages and rounding are incredibly useful business tools, but only if they’re applied correctly.

Basic mathematical concepts are invaluable in plenty of everyday situations. Of course, they’re vital in business situations too, but it’s important to ensure that you’re applying these concepts correctly.

Take percentages. They can be applied to just about any problem involving financial growth or decline, but beware of the common traps!

Suppose you’ve made an investment of $1,000, which is now worth $1,700. How much has the value increased in relative terms?

Percentages will give you the answer if you first subtract the initial value from the current value –  $1700 - $1000 = $700 – then divide this difference by the beginning value and multiply by 100: ($700 ÷ $1000) × 100 = 70 percent.

It seems simple enough, but beware of the typical slipups. First, remember: A percentage increase followed by the same percentage decrease does not leave you where you started; it leaves you worse off. So, if $1,000 grows by 50 percent, the sum is $1,500; however, a 50 percent loss on $1,500 would leave $750.

Moreover, percentages and percentage changes are often confused. If, for instance, a growth rate increases from 10 percent to 20 percent, it has risen by ten percentage points. But the percentage change is not 10 percent – it’s 100 percent, because the growth rate has doubled.

Rounding is another practical tool that can be applied incorrectly. Rounding comes in handy in day-to-day activities to simplify dealing with numbers. Values ending in four or less are rounded down, while amounts ending in five or more are rounded up.

But take care to only round the numbers after making any calculations. Take the numbers 1.5 and 2.4, which both round to 2. Now, 1.5 times 1.5 is 2.25, which rounds to 2, while 2.4 times 2.4 is 5.76, which rounds to 6. So, the right answer to “two times two” could be anywhere between two and six!

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