Introduction to Quantitative Analysis

Q 1-1) What is the difference between quantitative and qualitative analysis? Give several

examples.

Answer:

Quantitative analysis is the scientific approach to managerial decision making process in

which guesswork and emotions are not part in the process but using data analysis. Processing and

manipulating of raw data into meaningful information is the heart of quantitative analysis.

Qualitative analysis is concerned with the analysis of data that cannot be quantified.

Unlike with quantitative analysis that is restricted by certain classification rules or numbers,

qualitative data analysis can be wide ranged and multi-faceted. And it is subjective, descriptive,

non-statistical and exploratory in nature.

E.g. when investing we can look different alternatives of investment like investment in

stock market or in real estate. On the other hand quantitative analysis such as how much

investment will be worth in the future for given deposited with certain interest rate.

Group discussion, interviews can be included in qualitative analysis whereas online or paper

surveys helpful in quantitative analysis.

Q1-3) What are the three categories of business analytics?

Answer: Business analytics is broken into three categories: descriptive, predictive, and

prescriptive.

Descriptive analytics involves the study and consolidation of historical data for a business

and an industry.
Predictive analytics is aimed at forecasting future outcomes based on patterns in

the past data. Statistical and mathematical models are used extensively for this purpose.

Prescriptive analytics involves the use of optimization methods to provide new and better ways

to operate based on specific business objectives.

Q1-4) What is the quantitative analysis process? Give several examples of this process.

Answer:

The quantitative analysis process consists of defining a problem, developing a model,

acquiring input data, developing a solution, testing the solution, analyzing the results, and

implementing the results

Defining the Problem

The first step in the quantitative approach is to develop a clear, concise statement of the problem.

A problem might be inadequate health care delivery in a hospital. The objectives might be to

increase the number of beds, reduce the average number of days a patient spends in the hospital,

and increase the physician-to-patient ratio.

Developing a Model

Once we select the problem to be analyzed, the next step is to develop a model. Simply stated, a

model is a representation (usually mathematical) of a situation. E.g. architecture model,

schematic model or charts, mathematical model.

Acquiring Input Data

Once we have developed a model, we must obtain the data that are used in the model

(input data). E.g. company reports and documents can be used to obtain the necessary data.

Another source is interviews with employees or other persons related to the firm.

Developing a Solution

Developing a solution involves manipulating the model to arrive at the best (optimal)

solution to the problem. In some cases, this requires that an equation be solved for the best

decision. In other cases, you can use a trial-and-error method, trying various approaches and

picking the one that results in the best decision.

Testing the Solution

Before a solution can be analyzed and implemented, it needs to be tested completely. Because

the solution depends on the input data and the model, both require testing. E.g. Data can be

collected from various sources and compared using statistical analysis. Also physical model can

be tested with computer model simulation.

Analyzing the Results

Analyzing the results starts with determining the implications of the solution, solution to a

problem will result in some kind of action or change in the way an organization is operating. The

implications of these actions or changes must be determined and analyzed before the results are

implemented.
Implementing the Results

The final step is to implement the results. This is the process of incorporating the solution into

the company’s operations. Implementation is tedious task as best solution may or may not give

satisfactory result even it was analyzed or tested. E.g. forecasting about investment calculated

may differ based on current economic condition.

Q1-15) Gina Fox has started her own company, Foxy Shirts, which manufactures imprinted

shirts for special occasions. Since she has just begun this operation, she rents the equipment from

a local printing shop when necessary. The cost of using the equipment is $350. The materials

used in one shirt cost $8, and Gina can sell these for $15 each.

(a) If Gina sells 20 shirts, what will her total revenue be? What will her total variable cost be?

(b) How many shirts must Gina sell to break even? What is the total revenue for this?

Answer:

We have,

Profit = Revenue – (Fixed cost + Variable cost)

i.e. Profit = (Selling price per unit) (Number of units sold)

- (Fixed cost + (Variable cost per unit) (Number of units sold) )

∴ Profit = sX - f - vX

s = selling price per unit

f = fixed cost

v = variable cost per unit

X = number of units sold

Here,
S = $15

f = $350

v = $8

X =20 shirts

Therefore,

a) Revenue = (Selling price per unit) (Number of units sold)

∴ Revenue = S*X = 15*20 =$ 300

& Total Variable cost = v*X = 8*20 = $160

b) We have,

Break-even point (BEP) = f/(s-v)

∴ BEP = 350/ (15-8)

∴ BEP = 50

Hence total revenue for BEP (X) =50 shirts will be,

∴ Revenue = S*X = 15*50 =$ 750

Summary:

(a) Total revenue = $300; total variable cost = $160

(b) BEP = 50; total revenue = $750