CPA 112 Module 1
Overview of Quantitative Methods and
Its Application in Decision Making
Outline
-Define Management Science
A. Extent of Actual Use of Quantitative Tools and Techniques in
Business Decision Making;
B. Issues Associated with the Application of Quantitative Tools and
Techniques; and
C. Relevance of Management Science for Business, specially for
Accountancy Students.
Definition
• Management science, an approach to decision making based on the
scientific method, makes extensive use of quantitative analysis.
• A variety of names exist for the body of knowledge involving quantitative
approaches to decision making; in addition to management science, two
other widely known and accepted names are operations research and
decision science. Today, many use the terms management science, operations
research, and decision science interchangeably. Camm, J., Cochran, J., Fry, M.,
Ohlmann, J., Anderson, D., Sweeney, D., and Williams, T. (2023)
• Note: older books use Quantitative Methods for Business.
Definition
• Quantitative techniques are a collection of mathematical and statistical tools that are
used to provide powerful means of analysis using quantitative data for effective
decision making in business. These techniques involve systematic and scientific
methods for solving complex problems for taking effective business decisions (Bansal and
Verma, n.d).
• Some examples of quantitative techniques used in business decision making include
linear programming, regression analysis, data mining, probability decision theory, and
queuing theory (Commerce Mates, 2023. Retrieved August 31, 2023 from
https://commercemates.com/quantitative-techniques-for-business/#google_vignette)
• Quantitative analysis is now considered a better approach to making informed
decisions as it is the process of collecting and evaluating measurable and verifiable
data such as revenues, market share, etc. to understand the behavior and performance
of a business (Taylor, 2023 from
https://corporatefinanceinstitute.com/resources/data-science/quantitative-analysis/).
According to Zhang (2022), these are the representative schools of system science theory:
According to Zhang (2022), these are the representative schools of system science theory:
A. Extent of Actual Use of Quantitative Tools
and Techniques in Business Decision
Making
• Financial Analysis: Quantitative tools like financial ratios, net present
value (NPV), return on investment (ROI), and cost-benefit analysis are
extensively used in financial decision-making. These tools help in
evaluating the financial health of a company, assessing the
profitability of projects, and making investment decisions.
• Market Research and Data Analytics: In marketing and sales,
quantitative techniques are used to analyze market trends, customer
behavior, and sales data. This includes techniques such as regression
analysis, data mining, and predictive modeling to understand
consumer preferences and market dynamics.
A. Extent of Actual Use of Quantitative Tools
and Techniques in Business Decision
Making
• Operations and Supply Chain Management: Businesses often use
quantitative methods such as linear programming, inventory
management models, and supply chain optimization to streamline
operations, minimize costs, and enhance efficiency.
• Risk Management: Quantitative tools like Monte Carlo simulations
and Value at Risk (VaR) analysis are used to assess and mitigate
financial and operational risks. These tools help organizations make
informed decisions regarding risk exposure and hedging strategies.
A. Extent of Actual Use of Quantitative Tools
and Techniques in Business Decision
Making
• Human Resources: Quantitative analysis is applied in HR for
workforce planning, talent acquisition, performance evaluation, and
compensation management.
• Strategic Planning: Quantitative techniques are employed in strategic
decision-making to assess market potential, competitive positioning,
and scenario planning.
• Quality Control and Six Sigma: Manufacturing and service industries
often use quantitative tools like Six Sigma methodologies to improve
quality, reduce defects, and optimize processes.
A. Extent of Actual Use of Quantitative Tools
and Techniques in Business Decision
Making
• Customer Relationship Management (CRM): Quantitative analysis is
used to segment customers, predict customer churn, and identify
opportunities for cross-selling and upselling.
• Project Management: Quantitative project management techniques
like Critical Path Analysis (CPA) and Earned Value Management (EVM)
are used to plan, monitor, and control projects.
• Investment and Portfolio Management: In finance and investment,
quantitative methods play a crucial role in portfolio optimization,
asset allocation, and risk assessment.
B. Issues Associated with the Application
of Quantitative Tools and Techniques
• The extent of use can vary based on factors:
• industry's nature,
• company's size,
• available data, and
• expertise of decision-makers.
Small businesses may rely more on qualitative judgment due to
resource constraints, while larger corporations may have dedicated
analytics teams and advanced software tools to support quantitative
analysis.
C. Relevance of Management Science for
Business, specially for Accountancy
Students
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CPA 112 Module 1
Overview of Quantitative Methods and
Its Application in Decision Making
