IB Docs (2) Team
Quantitative techniques
The IB DP Business Management course (first exams 2024) includes a range of quantitative techniques that you must become familiar with. This applies to both SL and HL students. Quantitative techniques are integral to learning Business Management for numerous reasons, which include the following reasons:
Business Management is essentially about problem solving and decision making. Quantitative techniques can help managers and entrepreneurs to make more informed decisions, based on scientific reasoning rather than intuition.
Completing your internal assessment with quantitative techniques can improve the conclusion and evaluation of the research question.
Similarly, the extended essay tends to reach the higher mark bands if it includes aspects of quantitative analysis; relying only on qualitative techniques can result in an overly descriptive essay.
The questions in the Paper 2 examination are predominantly of a quantitative nature.
The following section lists the quantitative techniques covered in the syllabus. Use the hyperlink to access the notes and resources to fine-tune your understanding and application of these tools and techniques. Click the relevant icon to access the information for each unit of the syllabus.
Please note that not all quantitative techniques require calculations, although they can help to enhance student understanding. Quantitative terms, tools, and techniques that require calculations are indicated by an asterisk (*).
Unit 1 - Introduction to Business Management
1.3 - Common business objectives including growth, profit, protecting shareholder value
1.5 - Internal and external economies and diseconomies of scale
Unit 2 - Human resource management
2.2 - Span of control and Levels of the hierarchy
2.4 - Salary, Wages (time and piece rates), and Commission
3.3 - The following types of cost, using examples: Fixed, Variable, Direct, and Indirect (overheads)
3.3 - Total revenue and revenue streams, using examples
3.4 - Profit and loss account (AO2, AO4)*
3.4 - Balance sheet (AO2, AO4)*
3.4 - Depreciation using the following methods (HL only): Straight line method, and Units of production method (AO2, AO4)*
3.5 - The following profitability ratios: Gross profit margin, Profit margin, and Return on capital employed (ROCE) (AO2, AO4)*
3.5 - The following liquidity ratios: Current ratio, and Acid test (quick) ratio (AO2, AO4)*
3.6 The following efficiency ratios (HL only): Stock turnover, Debtor days, Creditor days, and Gearing ratio (AO2, AO4)*
3.7 - The difference between profit and cash flow
3.7 - Working capital (AO2, AO4)*
3.7 - Liquidity position
3.7 - Cash flow forecasts (AO2, AO4)*
3.8 - Investment opportunities using payback period, average rate of return (ARR) and
NPV (HL only) (AO2, AO4)*3.9 - Constructing a budget (HL only) (AO2, AO4)*
3.9 - Variances (HL only) (AO2, AO4)*
- 4.1 - Market share (AO2, AO4)*
- 4.1 - Market growth (AO2, AO4)*
- 4.3 - The benefits and limitations of sales forecasting (link with BMT 15 - Simple linear regression for HL only)
- 4.5 - The relationship between the product life cycle, investment, profit and cash flow
- 4.5 - The following aspects of branding: brand loyalty and brand value
- 4.5 - The appropriateness of the following pricing methods: Cost-plus (mark-up) pricing, Loss leader, Predatory pricing, Premium pricing, Dynamic pricing (HL only), Contribution pricing (HL only), and Price elasticity of demand (HL only)
Unit 5 - Operations Management
- 5.5 - Total contribution versus contribution per unit (link to BMT 14 - Contribution for HL only)
- 5.5 - A break-even chart and the following aspects of break-even analysis: Break-even quantity/point, Profit or loss, Margin of safety, Target profit output, Target profit, and Target price (AO2, AO4)*
- 5.5 - The effects of changes in price or cost on the break-even quantity, profit and margin of safety, using graphical and quantitative methods (AO2, AO4)*
- 5.6 - Stock control charts based on the following (AO2, AO4)*
- 5.6 - Production planning (HL only): Lead time, Buffer stock, Reorder level, and Reorder quantity (AO2, AO4)*
- 5.6 - Capacity utilization rate (AO2, AO4)*
- 5.6 Defect rate (AO2, AO4)*
- 5.6 Labour productivity, capital productivity, productivity rate, operating leverage (AO2, AO4)*
- 5.6 Cost to buy (CTB) and Cost to make (CTM) (AO3, AO4)*
The Business Management Toolkit (BMT)
Decision trees (AO2, AO4)*
Descriptive statistics - These include the following: Mean, Mode, Median, Bar charts, Pie charts, Infographics, Quartiles, and Standard deviation (AO2, AO4)*
Force field analysis (HL only) (AO2, AO4)*
Gantt chart (HL only) (AO2, AO4)*
Contribution (HL only) - Includes the following: Make or buy analysis, Contribution costing, and Absorption costing (AO2, AO4)*
Critical path analysis (HL only) - Includes the following: Completion and analyses of a critical
path diagram (drawing of the diagram is not expected, but calculations of the earliest start time and latest finish time are required), Identification of the critical path, and Calculation of free and total float (AO2, AO4)*Simple linear regression (HL only) - Includes the following: Scatter diagrams, Line of best fit, and Correlation/Extrapolation (AO2, AO4)*
There are more than 80 quantitative techniques or key terms in the new syllabus (see the list below). The quantitative techniques for HL only candidates are shown in red italic.
Note that the vast majority of the formulae for the key terms or quantitative techniques below do not appear in the formulae sheet for external assessments (pages 64 - 65 of the guide).
Also, please note that the prescribed formats for the balance sheet, profit & loss account, cash flow forecasts, budgets, and the discount factors (needed to calculate NPV) are not included in the formulae sheet for the external exams.
Absorption costing
Acid test (quick) ratio
Average rate of return (ARR)
Bar charts (descriptive statistics)
Break-even quantity/point
Buffer stock (production planning)
Capacity utilization rate
Capital productivity rate
Closing balance (cash flow forecasts)
Contribution (break-even analysis)
Contribution costing
Contribution per unit (unit contribution)*
Contribution pricing*
Cost to buy (CTB)
Cost to make (CTM)
Cost of sales (COS)
Creditor days (efficiency ratio analysis)
Current assets (balance sheet)
Current liabilities (balance sheet)
Current ratio
Debtor days (efficiency ratio analysis)
Decision trees
Defect rate
Earliest start time (critical path analysis)
Equity or total equity (balance sheet)
Free float (critical path analysis)
Gearing ratio (efficiency ratio analysis)
Gross profit (profit and loss account)
Gross profit margin (GPM)
Labour productivity rate
Labour turnover
Latest finish time (critical path analysis)
Lead time (production planning)
Line of best fit
Loss (break-even analysis)
Make or buy analysis
Margin of safety
Market share
Market growth
Mean (descriptive statistics)
Median (descriptive statistics)
Mode (descriptive statistics)
Net assets (balance sheet)
Net cash flow (cash flow forecasts)
Net current assets (or working capital)
Net present value (NPV)
Non-current assets (balance sheet)
Opening balance (cash flow forecasts)
Operating leverage
Payback period (linear method)
Pie charts (descriptive statistics)
Price elasticity of demand (PED)*
Productivity rate
Profit (balance sheet)
Profit (break-even analysis)
Profit (profit and loss account)
Profit after interest and tax
Profit before interest and tax
Profit before tax
Profit for period (income statement)
Profit margin (mark up)
Profit margin (profitability and liquidity ratio analysis)
Quartiles (descriptive statistics)
Reorder level (production planning)
Reorder quantity (production planning)
Retained profit
Return on capital employed (ROCE)
Sales forecasting
Sales revenue
Standard deviation (descriptive statistics)
Stock turnover ratio
Straight line method of depreciation
Target price (break-even analysis)
Target profit (break-even analysis)
Target profit output (break-even analysis)
Total assets (balance sheet)
Total contribution*
Total costs
Total float (critical path analysis)
Total contribution (break-even analysis)
Total revenue
Total liabilities (balance sheet)
Units of production depreciation rate
Variances (budgets)
Working capital (or net current assets)
* These are not listed as AO4 learning outcomes in the syllabus, although it is anticipated that many teachers will teach students the calculations to support understanding of these terms in the guide.
| No. | Formula | Key term |
| 1. | Sales revenue – Cost of sales | Gross profit |
| 2. | Fixed costs / (Price – Average variable cost) | |
| 3. | Opening stock + Purchases – Closing stock | |
| 4. | Total variable cost + Total fixed cost | Total cost |
| 5. | Current assets – Current liabilities | (net current assets) |
| 6. | Profit (or target profit) | Total contribution – Total fixed costs |
| 7. | Total revenue – Total cost | Profit |
| 8. | Net profit – Gross profit | Expenses |
| 9. | (Current assets – Stock) / Current liabilities | |
| 10. | Price – Average variable cost | Unit contributio |
| No. | Formula | Key term |
| 1. | Profit after interest and tax – Dividends | Retained profit |
| 2. | Non-current assets + Working capital – Non-current liabilities | Net assets |
| 3. | Gross profit – Expenses | Profit |
| 4. | Total assets – Total liabilities | Equity (or Shareholders’ equity) |
| 5. | Non‐current liabilities + Equity | |
| 6. | (Gross profit / Sales revenue) × 100 | |
| 7. | Current assets / Current liabilities | |
| 8. | Actual sales volume – Break-even sales volume | |
| 9. | (Firm's sales revenue / Total industry's sales revenue) × 100 | |
| 10. | (Profit before interest and tax / Capital employed) × 100 |
| No. | Formula | Key term |
| 1. | Reorder quantity | Maximum stock level – Buffer stock level |
| 2. | Defect rate | |
| 3. | Labour productivity rate | Total output / Total labour input |
| 4. | Lead time | Date of delivery – Date when the order was placed |
| 5. | Straight line depreciation (per year) | |
| 6. | Units of production method (depreciation) | |
| 7. | Labour turnover rate | (Number of employee departures / Average number of employees) × 100 |
| 8. | Variance | |
| 9. | Operating leverage | Total contribution / Profit |
| 10. | Depreciation rate |
To gain a better knowledge of each of the 80+ quantitative techniques or key terms in the syllabus, make sure you know and understand the reasons for the correct unit of measurement for each of these. For example, the gross profit margin (GPM) is expressed as a percentage to 2 decimal places.
Have a go at the follow quiz and identify the correct unit of measurement for each given key term / quantitative technique.
| No. | Key term / Quantitative technique | Unit of measurement |
| 1. | Cost of sales (COS) | Currency, e.g., $ or € |
| 2. | Margin of safety (MOS) | Units of output (whole number) |
| 3. | Payback period (PBP) | Time, e.g., number of years and months |
| 4. | Profit margin (mark-up) | Currency, e.g., $ or €, or percentage figure |
| 5. | Mean (descriptive statistics) | Number, often expressed to 2.d.p. |
| 6. | Average rate of return (ARR) | Percentage (2 d.p.) |
| 7. | Market share | Percentage (2 d.p.) |
| 8. | Working capital (net current assets) | Currency, e.g., $ or € |
| 9. | Acid test | Ratio, e.g., 1.5 : 1 |
| 10. | Return on capital employed (ROCE) | Percentage (2 d.p.) |
| 11. | Net present value (NPV) (HL only) | Currency, e.g., $ or € |
| 12. | Variance (HL only) | Favourable or unfavourable, usually in $ |
| 13. | Units of production depreciation rate (HL only) | Currency, e.g., $ or € |
| 14. | Defect rate (HL only) | Percentage (2 d.p.) |
| 15. | Earliest start time (critical path analysis) (HL only) | Time, e.g., days, weeks, or months |
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