What is Numerical Comprehension?
Numerical comprehension is a combination of mathematical skill and knowledge with an understanding of the way math can be applied and used in different situations.
It is the recognition of mathematical concepts and principles, and the ability to manipulate numerical data using math to analyze and interrogate it, making it easier to come to a logical conclusion.
Numerical comprehension is often referred to as numerical reasoning, especially when it comes to pre-employment testing - usually because in aptitude tests, you are being evaluated on your ability to use basic mathematical operations and principles to analyze presented data so that you can answer a question about it in a mathematically reasoned way.
Importance of Numerical Comprehension in Finance Roles
Finance roles are all about the numbers of a business, all coming down to the management of profit and loss.
In finance, you will have to be comfortable calculating the percentage of sales tax on items, understand how to apply pension contributions in payroll, and arrange for the payment of invoices.
Money is obviously the biggest part of the finance role, from ensuring that staff get paid, suppliers are paid, and that customers pay their bills - and that means you’ll need to analyze incoming payments and outgoing payments to make sure that everything balances.
You don't necessarily need to be an advanced mathematician to work in finance, but you do need to know how to work with numbers in different ways.
Companies that assess numerical comprehension
There are many companies that use numerical comprehension tests as part of their recruitment process.
Almost every finance-related position in almost every company will involve some sort of numeracy question, whether that is numerical reasoning, financial reasoning, or even just a simple numerical ability test.
Some companies that use numerical comprehension or reasoning tests include:
The numerical tests might be used independently, or they might be part of a wider battery of aptitude tests.
Numerical comprehension tests
A numerical comprehension test is usually used as part of the recruitment process, delivered as the next stage once your application has been sifted and you’ve met the basic criteria for a role.
In numerical comprehension tests, you will be asked questions about numerical data presented in different ways, and you will have to demonstrate that you can read, understand, and manipulate that data using appropriate mathematical principles to answer the question.
Most numerical comprehension and reasoning tests are relatively short; you’ll get around a minute to answer the question, and you may not be able to use a calculator - which means you’ll have to answer quickly using your mental mathematics skills.
For employers, the numerical comprehension test is a benchmark, set to ensure that candidates are able to work with numerical data at a level that makes them suitable for the role. Each candidate has the same opportunity to demonstrate that they are competent and able, and those that do not reach the benchmark will be filtered out.
The data provided by the results of the numerical comprehension test make it much easier for recruitment teams to make decisions about which candidates have what it takes to be successful in the future.
Numerical Comprehension Practice Questions
Exercise 1: Basic Calculations
Basic calculations are usually just the arithmetic operations that you use in everyday life (addition, subtraction, multiplication, and division).
It also includes fractions, decimals, and percentages.
Solve this equation:
(2+3) + 4 = ?
a) 7
b) 8
c) 9
d) 10
Answer: c) 9 - You need to remember to solve the brackets first.
These basic calculations are ones that you will use to help you solve many of the other types of questions in the numerical comprehension test, so you need to have a good grasp of how to answer them.
Exercise 2: Percentage and Ratio Calculations
Percentages and ratios are relatively simple concepts. In a numerical comprehension test, you might be required to find the proportion of something compared to something else, or work out a percentage increase or decrease.
Having a simple strategy to use when dealing with percentages and ratios will help you solve these problems under pressure in a numerical comprehension test.
What is 15% of $30?
a) $5
b) $4.50
c) $3
d) $7
Answer: b) $4.50. You can solve this by finding 10% and then adding 5% (which is half), or solve it another way if you find that easier.
If John and Steven earned $30 together, and Steven’s share is $20, what is the ratio of their earnings?
a) 3:1
b) 2:1
c) 3:2
d) 4:1
Answer: b) 2:1. Ratios are all about proportion, and you need to be confident in your strategy for solving problems like this.
Exercise 3: Time Value of Money
In time value of money questions, you will be dealing with the idea that the value of something will increase (or decrease) over time.
This might involve the addition of interest on a loan, for example.
Calculate the total cost to pay back a loan of $10,000 with 10% interest a year over 5 years.
Answer: $15,000 - there is a specific formula that can be used for this:
FV (future value)
PV (current value)
N (number of compounding periods)
I (interest rate)
T (total number of years)
FV = PV x [1 + (i / n)] (n x t)
In this case:
FV = £10,000 x [1 + (10%/1)] (1 x 5) = $15,000
Exercise 4: Currency Conversions and Exchange Rates
Exchange rates and currency conversions might be important if you are working with international clients, or needing to pay for goods from overseas suppliers.
How much would a $10 purchase cost in Sterling with an exchange rate of $1 - £0.9179?
a) £9.18
b) £0.92
c) £4.68
d) £9.50
Answer: a) £9.18. This is a simple example; with fewer round numbers the calculation would be a lot more complicated.
Exercise 5: Word Problems
Word problems are used to evaluate your ability to pull the necessary data out of a passage of information. They tend to take the format of a problem about travel or work rate.
If James traveled at 30 miles per hour steadily, how far would he get in 180 minutes?
a) 100 miles
b) 80 miles
c) 180 miles
d) 90 miles
Tips for Improving Numerical Comprehension
Tip 1: Consistent Practice and Review
Like any skill, the more you use numerical comprehension, the easier you will find it.
You can practice using things like online tests, or even through revision resources aimed at students.
Make practice a part of your daily or weekly routine, even if it is just for a few minutes at a time - keep that mathematical muscle flexed so you can rely on it when you need it.
Try and review the basics as much as you can as part of your revision and practice sessions.
Tip 2: Applying Skills to Real-World Scenarios
Using numerical comprehension abilities in a vacuum - just in test situations - might not be the best way for you to improve - many people find using math in everyday situations helps them to improve.
Instead of reaching for a calculator, try and do the calculation in your head when you are trying to determine how much a new shirt will cost in the sale.
Applying numerical skills to real life makes it much more relevant, and you might find it easier to improve this way.
Tip 3: Seeking Feedback and Identifying Areas for Improvement
If you use practice tests, you can pinpoint any particular areas of your knowledge that might need review - these should be easy to ascertain because they'll be the questions you got wrong. You can then use this information to review the relevant mathematical principles and revise.
Resources for Numerical Comprehension Practice
There are many places you can go online for numerical comprehension practice.
If practice tests are what you are looking for, there is a range available at Fintest, including numerical reasoning and financial reasoning - which you are likely to come across when you are looking for a role in finance.
You can also find tests that are used in specific recruitment processes, so you can practice more effectively when you apply for your ideal role at companies like Brookfield Asset Management and Experian.
