Importance of Quantitative to Managers


Managers are often faced with making decisions in an uncertain and risky business environment and as a result the use of quantitative methods in decision making is rapidly becoming common in financial analysis.

The Oxford Dictionary defines quantitative methods as ‘The range of mathematical and statistical techniques used to analyse data’.

Harrington (2009) noted that ‘quantitative methods are used to measure and model outcomes’

Quantitative methods therefore, may be explained as techniques of analysing data to predict or explain business phenomena

The importance of the quantitative methods to the Finance Manager is very enormous as literature on finance is increasingly relying on mathematical models such as quantitative to explain behavior and trends in the market economy.

Very often most decisions need to be taking in the light of incomplete information; not everything will be known about the current and very little will be known about the future business environment.   Quantitative methods can therefore be used by the finance manager to analyze the past and infer future trends.  

Furthermore, the Finance Manager uses several powerful estimation functions to perform business forecasting such as causal models and regression analysis. He prepares the operational budget on cost and revenue using quantitative methods to analyse historical data. .

Also, the Finance Manager uses the quantitative methods in communicating financial performance to users of accounting information. For example financial data could be presented in ratios and graphs when interpreting the Final Accounts.

In determining the profitability of products and services the Financial Manager could employ the use of probability in deciding among alternatives which product and service offer the highest profit.

Trends in the market could be identified, measured and analysed numerically to determine the various aspect of the...