Arba Minch University

COLLEGE of Business and economics

DEPARTMENT OF MANAGEMENT MBA PROGRAM

Assignment of Quantitative Analysis for Decision Making

Name: - Chirotaw Kentib

ID: - PEBE/022/12

Submitted to: -: Mr. Daniel Tekle (Assi. Professor)

1. What is quantitative analysis? How do you think is related to
management field or decision-making?
Answer: -
Quantitative analysis (QA) is a technique that seeks to understand behavior by using
mathematical and statistical modeling, measurement, and research. Quantitative
analysts aim to represent a given reality in terms of a numerical value.

Quantitative analysis is employed for several reasons, including measurement,

performance evaluation or valuation of a financial instrument, and predicting real-
world events, such as changes in a country's gross domestic product (GDP).
Quantitative analysis is the process of collecting and evaluating measurable and
verifiable data such as revenues, market share, and wages in order to understand the
behavior and performance of a business. In the past, business owners and company
directors relied heavily on their experience and instinct when making decisions.
However, with the era of data technology, quantitative analysis is now considered a
better approach to making informed decisions.
A quantitative analyst’s main task is to present a given hypothetical situation in terms
of numerical values. Quantitative analysis helps in evaluating performance, assessing
financial instruments, and making predictions. It encompasses three main techniques
of measuring data: regression analysis, linear programming, and data mining.

Quantitative analysis (QA) is a technique that seeks to understand behavior by using

mathematical and statistical modeling, measurement, and research. Quantitative
analysts aim to represent a given reality in terms of a numerical value.

Quantitative analysis is employed for several reasons, including measurement,

performance evaluation or valuation of a financial instrument, and predicting real-
world events, such as changes in a country's gross domestic product (GDP).
Quantitative analysis provides analysts with tools to examine and analyze past,
current, and anticipated future events. Any subject involving numbers can be
quantified; there are thus many fields in which quantitative analysis is used and is
beneficial.
For example, quantitative analysis is used in analytical chemistry, financial analysis,
social science, and organized sports. In the financial world, analysts who rely strictly
on quantitative analysis are frequently referred to as "quants" or "quant jockeys."
In the financial services industry, QA is used to analyze investment opportunities,
such as when to purchase or sell securities. Investors perform quantitative analysis
when using key financial ratios, such as the price-earnings ratio (P/E) or earnings per
share (EPS), in their investment decision-making process (e.g., whether to purchasing
shares of a company's stock). Quantitative analysis ranges from the examination of
simple statistical data (e.g., revenue) to complex calculations (e.g., discounted cash
flow or option pricing).

2.Discuss briefly the history of quantitative methods in decision-making?

Answer: -
Quantitative history is the term for an array of skills and techniques used to apply the
methods of statistical data analysis to the study of history. Sometimes also called
cliometrics by economic historians, the term was popularized in the 1950s and 1960s
as social, political and economic historians called for the development of a ‘social
science history’, adopted methods from the social sciences, and applied them to
historical problems. These historians also called for social scientists to historicize
their research and consciously examine the temporal nature of the social phenomena
they explored. For both types of questions, historians found that they needed to
develop new technical skills and data sources. That effort led to an array of activities
to promote quantitative history. Classical historical research methodology relies upon
textual records, archival research and the narrative as a form of historical writing. The
historian describes and explains particular phenomena and events, be they large epic
analyses of the rise and fall of empires and nations, or the intimate biographical detail
of an individual life. Quantitative history is animated by similar goals but takes as its
subject the aggregate historical patterns
of multiple events or phenomena. Such a standpoint creates a different set of issues
for analysis. A classic historical analysis, for example, may treat a presidential
election as a single event. Quantitative historians consider a particular presidential
election as one element in the universe of all presidential elections and are interested
in patterns which characterize the universe or several units within it. The life-course
patterns of one household or family may be conceived as one element in the aggregate
patterns of family history for a nation, region, social class or ethnic group. Repeated
phenomena from the past that leave written records, which read one at a time would
be insignificant, are particularly useful if they can be aggregated, organized,
converted to a electronic database and analyzed for statistical patterns. Thus records
such as census schedules, vote tallies, vital (e.g., birth, death and marriage) records; or
the ledgers of business sales, ship crossings, or slave sales; or crime reports permit the
historian to retrieve the pattern of social, political, and economic activity in the past
and reveal the aggregate context and structures of history.
3.What is scientific method?
Answer: -
The scientific method is a systematic method of investigation, evaluation,
experimentation, interpretation and theorizing. It is characterized by critical
discrimination generally and system, and empirical verification. Generally speaking,
the scientific method is characterized by a systematic study, based on theory and facts,
universality or generality, objectivity of observation, predictability of results, and
verifiability of the phenomenon. It consists of a number of formalities and procedures,
which are time consuming. Time management is the basic requirement for the success
of managerial decisions. Many management problems require timely solutions and
decisions. In such situations, the management may not have adequate time at its
disposal to make use of scientific studies before arriving at decisions. Laboratory
experiments occupy a prominent place in the scientific method, which may not be
useful in many situations of managerial decision-making.
Physical science phenomena may be subjected to laboratory tests and physical
control. Most of the managerial policies and decisions, however, affect human beings.
An individual’s behavior differs substantially from that of another from time to time,
place to place and environment to environment and it cannot be placed under absolute
control, for it is very difficult to employ the scientific method is the practice of
management. Despite the development of dynamic methods of management
information systems, many decision areas, such as those of labor productivity,
materials handling, product planning and consumer behavior, require complex data to
be analyzed as a part of the scientific method which may not be appropriate in quick
managerial decisions. The greater the complexity of the data, the lesser is the
possibility of accuracy and the lesser is its utility in the management process.
4. What are different types of model? Illustrate with example
Answer: -
The models can be categorized by their types, dimensionality, function, purpose of
abstraction the basic types of models are:
1. Iconic Models
2. Analog Models
3. Symbolic Models
Iconic Models
An iconic model is an exact physical representation and may be larger or smaller than
what it represents. The characteristics of an iconic model and the object that it
represents are the same.
Analog Models
Analogue models use one set of physical movements to represent another set of
physical movements. An analogue model may be in the form of a diagram such as a
demand curve, histogram, etc.
Symbolic Models
A symbolic or mathematical model represents a problem with the use of symbols.
This model is frequently used in Operations Research. A symbolic or mathematical
model represents a problem with the use of symbols. This model is frequently used in
Operations Research.
Example: Consider a business firm that sells a product. The product costs $5 to
produce and sell for $20. A model that computes the total profit that will accrue from
the items sold is Z = 20x – 5x . Let us assume that the product is made from steel and
that the business firm has 100 pounds of steel available. If it takes 4 pounds of steel to
make each unit of the product, we can develop an additional mathematical
relationship to represent steel use: 4x= 100 lb of steel.
The model is:
Maximize Z = 20x – 5 objective function
Subject to
4x= 100 constraint x> 0
Developing a solution involves manipulating the model to arrive the (optimal)
solution to the problem. Solving the model above we have = 25 units, and Z = $375 in
profit.
5.Discuss the process of quantitative analysis (scientific methods?
Answer: -
The process of quantitative analysis is a six-step process that requires definition of the
problem, developing and testing a model, and selecting an optimal solution.
1.Defining the problem requires a consultation with management to identify the
problem and expected goals. During this time relevant data will be gathered to aid in
the development of a model, mathematical or spreadsheet.
2.Once the problem, goals, and data are obtained a model of the problem can be
developed. For smaller problems, it may be beneficial to represent the model in
algebraic form even if a spreadsheet model will be used to solve. However, when
using a spreadsheet model, it is advisable to sketch the model to establish the
objective function, decision variables, dependencies, and constraints before building
the model.
3.If using a spreadsheet model, one must design or select the proper software for the
problem. In particular the program should be able to handle the volume of the
problem, especially for larger problems with many constraints and variables.
4.Testing of the model is essential to the validity of the suggested solution; therefore,
the model should undergo intensive tests on a small scale to ensure it “provides a
sufficiently accurate representation of the real problem.
5.After testing is complete and the model is deemed acceptable, the problem can be
solved to determine the optimal solution(s) based on the goals established in step one.
6.Finally, after an optimal solution is found and selected it can be implemented and
monitored to determine effectiveness.