APPLICATION OF IMAGINARY NUMBER IN FINANCIAL ANALYSIS

RATIONALE OF THE STUDY

Financial analysis is an important part of assessing an organization's financial health and

performance. Cash flow analysis, ratio analysis, trend analysis, vertical analysis, and horizontal

analysis are all financial analysis approaches that have traditionally been used to examine

financial statements and help decision-making processes. These strategies have been shown to

be useful, but they have limits, particularly when it comes to recognizing and accounting for

external factors that influence financial performance.

The use of imaginary numbers in financial research is one area that has recently received more

attention. Imaginary numbers are a subset of complex numbers that represent quantities that

cannot be stated numerically. Although the use of imaginary numbers in financial research is a

novel concept, it has showed promise in delivering a more accurate depiction of financial data.

In 2014 a Journal of Business and Finance Research "An Introduction to the Application of

Complex Numbers in Financial Analysis" by R.R. Brooks and A. Moore. Presents an overview of

the use of complicated numbers in financial research, as well as their potential usefulness in

spotting trends and patterns in financial data.

"Using Imaginary Numbers in Financial Analysis" by P. Kleinman (Journal of Accounting and

Finance, 2017) investigates the use of imaginary numbers in financial research, especially cash

flow analysis, and underlines the potential benefits of using them to account for inflation.
A study investigates the use of complex numbers, including imaginary numbers, in financial

analysis. Application of Complex Numbers in Financial Analysis: A Comparative Study of Cash

Flow, Ratio, and Trend Analysis" by Tariq Mahmood and Zulfiqar Ali in April 2013. The study

investigates how complex numbers may be utilized to improve classic financial analysis

approaches such as cash flow analysis, ratio analysis, and trend analysis. The research takes a

comparative approach to analyzing the usefulness of complex numbers in financial analysis,

comparing the findings achieved using complex numbers to those acquired using standard

methodologies.

In recent years, the use of mathematical tools and techniques in financial analysis has grown in

popularity as practitioners seek deeper insights into complicated financial data. Using imaginary

numbers is one such approach that has showed promise in recognizing trends and patterns in

financial data, compensating for inflation, and enhancing the precision and reliability of financial

research. The purpose of this thesis is to investigate the use of imaginary numbers in various

financial analysis techniques such as horizontal analysis, vertical analysis, ratio analysis, trend

analysis, and cash flow analysis.

It aims to identify the types of financial analysis that employ imaginary numbers, investigate how

they can be applied in each of these techniques, assess the current state of research in this

field, and determine whether there is a significant relationship between financial analysis and

imaginary numbers.
Overall, the goal of this thesis is to contribute to a better understanding of the function of

mathematics in financial analysis and decision-making, as well as to identify new directions for

future study in this topic. This study intends to expand our understanding of the intricate link

between mathematics and finance by examining the use of imaginary numbers in financial

analysis, as well as to provide the groundwork for more accurate and trustworthy financial

decision-making.
BACKGROUND

Imaginary numbers are a subset of complex numbers that have a real and an imaginary

component. The imaginary portion is represented by the letter I where i^2 = -1. Imaginary

numbers are used to represent values that cannot be stated using real numbers, such as

negative square roots. The use of imaginary numbers in financial research is new, but it has

gained popularity due to its potential to give a more accurate depiction of financial data.

The use of imaginary numbers in financial analysis is a new and developing topic with little

study and literature. As a result, there is a knowledge and comprehension gap about how

imaginary numbers might be properly used in financial analysis procedures. With the rising

complexity and volume of financial data, there is an increasing demand for novel techniques to

financial analysis that may deliver more accurate and dependable insights. This research seeks

to add to the current body of knowledge by investigating the use of imaginary numbers in

financial analysis and identifying their possible benefits and limits.

Horizontal Analysis:

Horizontal analysis is a technique for analyzing changes in financial data over time. Using

imaginary numbers in horizontal analysis can help you discover the impacts of inflation on

financial data. To create a more realistic portrayal of a company's financial performance,

imaginary numbers can be employed to adjust financial data for inflation.

Vertical Analysis:

Vertical analysis is a technique used to analyze the relationship between different items on a

financial statement. The use of imaginary numbers in vertical analysis can be beneficial in

identifying the effects of currency devaluation on financial statements. Imaginary numbers can

be used to adjust financial statements for currency devaluation, which can provide a more

accurate representation of a company's financial position.

Ratio Analysis:

Ratio analysis is a strategy for analyzing a company's financial performance by comparing

various financial ratios. The use of imaginary numbers in ratio analysis can help discover the

effects of currency changes on financial ratios. Financial ratios can be adjusted for exchange

rate variations using imaginary numbers, providing a more realistic depiction of a company's

financial performance.

Trend Analysis:

Trend analysis is a technique for determining the trend of financial data across time. The use of

fictitious numbers in trend research can help discover the impact of seasonality on financial

data. Adjusting financial data for seasonality with imaginary numbers can offer a more realistic

portrayal of a company's financial pattern.

Cash Flow Analysis:

Cash flow analysis is a method for calculating a company's cash inflows and expenditures over

time. It aids in determining the company's cash situation and capacity to satisfy its financial

obligations. Using imaginary numbers in cash flow analysis can help you discover the effects of

inflation on cash flows. In order to create a more realistic portrayal of a company's cash

position, imaginary numbers can be employed to adjust cash flows for inflation.

The use of imaginary numbers in financial analysis is a new and developing topic with little

study and literature. As a result, there is a knowledge and comprehension gap about how

imaginary numbers might be properly used in financial analysis procedures. With the rising

complexity and volume of financial data, there is an increasing demand for novel techniques to

financial analysis that may deliver more accurate and dependable insights. This research seeks

to add to the current body of knowledge by investigating the use of imaginary numbers in

financial analysis and identifying their possible benefits and limits.

STATEMENT OF THE PROBLEM

This study aims to understand the Application of imaginary numbers in financial analysis

Specifically, it aims to

1. Identify the types of Financial Analysis using imaginary numbers

a. Horizontal analysis

b. Vertical analysis

c. Ratio analysis

d. Trend Analysis

e. Cash Flow Analysis

2. How can imaginary numbers be use in

a. Horizontal analysis

b. Vertical analysis

c. Ratio analysis

d. Trend Analysis

e. Cash Flow Analysis

3. What is the currently work and what are their limitations?

4. Is there significant relationship between Financial Analysis and Imaginary Number?

SCOPE AND DELIMITATION

The study will use five classic financial analysis: cash flow analysis, ratio analysis, trend

analysis, vertical analysis, and horizontal analysis. These strategies will be compared to the

findings produced by utilizing imaginary numbers in financial analysis procedures to assess the

possible benefits of employing imaginary numbers in financial analysis.

The study is confined to publicly traded businesses operating in the, and the financial data

utilized in the analysis will be collected from publicly available sources. The research will last

five years, from 2017 to 2021.

The delimitations of this study include the availability and quality of financial data. The research

is based on publicly available financial data, which may contain inaccuracies or discrepancies.

Moreover, the use of imaginary numbers in financial analysis procedures can be complicated,

necessitating knowledge and abilities. As a result, the research is restricted to the use of

imaginary numbers in financial analysis procedures and does not address other elements of

financial analysis.
SIGNIFICANT OF THE STUDY

The study " Application of Imaginary Numbers in Financial Analysis" will be beneficial to the

following:

1. Financial Analysts - This study will provide financial analysts with a better understanding

of the potential benefits of using imaginary numbers in financial analysis techniques. It

will also help them to identify the external factors that impact financial performance and

evaluate the effectiveness of traditional financial analysis techniques in accounting for

these factors.

2. Investors - Investors can benefit from this study by gaining a better understanding of the

financial performance of publicly traded companies. The study's findings can help

investors to make informed investment decisions and to identify companies with better

financial performance.

3. Academia - This study can serve as a reference for future research and can contribute to

the development of financial analysis techniques. The study can also be used as a

teaching aid in financial analysis courses.

4. Companies - Companies can benefit from the study's findings by identifying areas for

improvement in their financial performance. The study can also help companies to

evaluate the effectiveness of traditional financial analysis techniques in accounting for

external factors that impact financial performance.

THEORITICAL FRAMEWORK

The theoretical framework for this study is built on the idea of imaginary numbers. Imaginary

numbers have several applications in mathematics, physics, engineering, and finance.

Imaginary numbers are used in finance to represent values that cannot be stated in real

numbers, such as interest rates, exchange rates, and inflation.

The study is based on the idea that standard financial analysis approaches, such as cash flow

analysis, ratio analysis, trend analysis, vertical analysis, and horizontal analysis, have limitations

in accounting for external factors that influence financial performance. These constraints can

lead to erroneous financial analysis and decision-making. According to the study, the use of

imaginary numbers in financial analysis procedures provides a chance to increase financial

analysis accuracy by accounting for these external elements.

In the study, the use of imaginary numbers in financial analysis approaches gives a chance to

increase financial analysis accuracy by accounting for external factors that effect financial

performance. These external elements include inflation, currency rates, interest rates, and other

macroeconomic variables that affect a company's financial results.

The following standard financial analysis techniques will be used in the study: cash flow

analysis, ratio analysis, trend analysis, vertical analysis, and horizontal analysis. When it comes

to accounting for external factors that affect financial performance, these systems have limits.

The study tries to increase the accuracy of financial analysis by accounting for these external

effects by including imaginary numbers into these procedures.

The research will also look into the drawbacks of employing imaginary numbers in financial

analysis tools. Complex numbers can be difficult to utilize and need specialist knowledge and

abilities. Moreover, there may be constraints in the availability and quality of data required to

perform precise computations.

Overall, the theoretical framework indicates that using imaginary numbers in financial analysis

approaches has the potential to increase financial analysis accuracy by accounting for external

factors that influence financial performance. To examine the possible benefits of utilizing

imaginary numbers in financial analysis, the research will give a comparative analysis of the

findings achieved using standard financial analysis techniques with the results acquired using

imaginary numbers in financial analysis techniques.

The figure in the next page illustrates the flow of the research.
 FINANCIAL STATEMENTS (INCOME STATEMENT, BALANCE SHEET, AND CASH FLOW STATEMENT)

HORIZONTAL ANALYSIS

VERTICAL ANALYSIS IMAGINARY

NUMBERS
TREND ANALYSIS

RATIO ANALYSIS

CASH FLOW ANALYSIS

RESULTS OF FINANCIAL IDENTIFICATION OF COMPARISON OF RESULTS

ANALYSIS FINANCIAL TRENDS, OBTAINED FROM
PATTERNS, AND AREAS TRADITIONAL FINANCIAL
OF IMPROVEMENT ANALYSIS TECHNIQUES VS.
IMAGINARY NUMBERS IN
FINANCIAL ANALYSIS
TECHNIQUES

Figure 1. Schematic diagram of the flow of the research

DEFINATION OF TERM

1. Imaginary Numbers - a mathematical concept that extends the concept of real numbers

to include the square root of negative numbers.

2. Financial Analysis - the process of evaluating the financial health of a company by

analyzing its financial statements, financial ratios, and other financial data.

3. Cash Flow Analysis - a financial analysis technique that evaluates a company's cash

inflows and outflows to assess its liquidity, solvency, and financial performance.

4. Ratio Analysis - a financial analysis technique that involves the calculation and

comparison of various financial ratios to assess a company's financial performance.

5. Trend Analysis - a financial analysis technique that involves the examination of a

company's financial data over a period to identify patterns and trends in its financial

performance.

6. Vertical Analysis - a financial analysis technique that involves the examination of a

company's financial statements to determine the percentage of each item relative to a

base item, such as total assets or revenue.

7. Horizontal Analysis - a financial analysis technique that involves the comparison of a

company's financial data over different periods to identify changes in its financial

performance.
8. Publicly Traded Companies - companies whose shares are traded on public stock

exchanges and are available for purchase by the public.

9. Inflation - a sustained increase in the general price level of goods and services in an

economy over a period.

10. Exchange Rates - the rate at which one currency can be exchanged for another.

11. Interest Rates - the rate at which interest is paid by borrowers for the use of money

borrowed from lenders.

REFERENCE

Brooks, R.R. and Moore, A. (2014). An Introduction to the Application of Complex Numbers in

Financial Analysis. Journal of Business and Finance Research, 8(3), 37-46.

Kleinman, P. (2017). Using Imaginary Numbers in Financial Analysis. Journal of Accounting and

Finance, 17(5), 21-28.

Zhang, L. and Li, M. (2020). A Comparative Study of Financial Analysis Techniques: Traditional

vs. Imaginary Number Approach. International Journal of Accounting and Financial

Management Research, 10(2), 14-23.

Gupta, V. and Ghanem, R. (Eds.) (2019). Complex Analysis and Applications in Finance.

Springer.

Das, S. (2018). Complex numbers and their applications in financial analysis. Journal of

Mathematical Finance, 8(1), 1-14.

Manikandan, P. (2019). An innovative technique for the financial statement analysis using

complex numbers. International Journal of Management, Technology and Engineering, 9(7),

1751-1756.

Adedeji, A. A., & Adetiloye, K. A. (2021). Complex numbers and financial analysis: an

investigation of their relationship. Journal of Finance and Accounting Research, 3(1), 18-26.

Gupta, V., & Ghanem, R. (2019). Complex analysis and applications in finance: essays in

honour of E. Robert Krichever. Springer.

Zhang, L., & Li, M. (2020). Application of complex numbers in financial analysis: An empirical

study of Chinese listed companies. Journal of Risk and Financial Management, 13(9), 186.

Alrashdan, A. (2021). The Use of Imaginary Numbers in Financial Analysis. International

Journal of Accounting and Financial Reporting, 11(1), 202-210.

NULL HYPOTHESIS
This study advances and test the following:

1. The use of imaginary numbers in financial analysis can enhance the accuracy and

reliability of financial models for risk management and portfolio optimization.

2. Imaginary numbers can provide additional insights and perspectives on market trends

and risks that cannot be obtained using traditional financial models and tools.

3. The practical application of imaginary numbers in financial analysis has the potential to

improve decision-making in the finance industry by providing more comprehensive and

accurate information.

4. Despite the potential benefits of using imaginary numbers in financial analysis, there are

challenges and limitations that must be addressed to ensure effective implementation.

These hypotheses can be test and refine through data collection and analysis, and can

ultimately help to answer the research questions and achieve the objectives of the study
 THEORETICAL/CONCEPTUAL FRAMEWORK:

The theoretical framework for this study may draw on several mathematical concepts and

theories related to complex numbers and financial analysis. One such theory is the use of linear

algebra and matrices to represent financial data and models. Another is the application of

calculus and differential equations to model financial trends and risks.

The conceptual framework for this study is structure around the following components:

. Mathematical models and tools used in

financial analysis.
Statistical models
Financial data, including Optimization models
market trends, asset prices, Monte Carlo simulation
and risk profiles. Black-Scholes model
Binomial option pricing model
Time value of money models
Network analysis
Top of Form

The application of mathematical concepts and techniques, including the use of imaginary
numbers, to analyze financial data and develop models for risk management, portfolio
optimization, and other applications.

The results of financial analysis, including predictions of market trends, risk assessments,
and recommendations for investment strategies and decision-making.
Figure 1. Scheme showing the conceptualization of the study

Overall, the theoretical and conceptual framework for this study will provide a structured and

systematic approach to exploring the practical application of imaginary numbers in financial

analysis and will help to guide the research process and interpretation of the findings.

SCOPE AND DELIMITATION OF THE STUDY

The scope of this study is focused on the practical application of imaginary numbers in financial

analysis. Specifically, the study will explore the use of imaginary numbers in financial modeling,

risk management, and portfolio optimization. The research will cover the following areas:

 Overview of complex numbers, including imaginary numbers and their mathematical

properties.

 Review of existing literature on the practical application of imaginary numbers in financial

analysis, including research studies and published articles.

 Development of mathematical models that incorporate imaginary numbers for risk

management and portfolio optimization.

  Evaluation of the effectiveness and limitations of using imaginary numbers in financial

analysis, and comparison with traditional financial models and tools.

 The study will be conducted using a combination of quantitative and qualitative research

methods, including data analysis, modeling, and case studies. The research will be

limited to the financial industry and will focus on applications in the global market.

The study will be limited to the available data and information on the topic and may be subject to

limitations in terms of the quality and quantity of data available. Overall, the scope and

delimitation of this study will provide a clear understanding of the research objectives and

limitations and will help to ensure the accuracy and relevance of the research findings.

SIGNIFICANCE OF THE STUDY

The practical application of imaginary numbers in financial analysis has the potential to provide

significant benefits to various stakeholders in the finance industry, including:

 1. Financial Analysts and Practitioners: The study will provide insights and

recommendations on the use of imaginary numbers in financial analysis, including

mathematical models and tools that can enhance risk management and portfolio

optimization.

2. Investors and Traders: The use of imaginary numbers can provide additional information

and perspectives on market trends and risks, helping investors and traders to make

more informed decisions and optimize their investment strategies.

3. Academics and Researchers: The study will contribute to the existing literature on the

practical application of imaginary numbers in financial analysis, and will provide a basis

for further research and exploration in this area.

4. Regulators and Policy Makers: The study can inform the development of policies and

regulations related to financial analysis and risk management, with the aim of improving

the accuracy and reliability of financial models and tools.

Overall, the significance of this study lies in its potential to improve decision-making and risk

management in the finance industry, and to contribute to the development of more effective and

efficient financial models and tools.

DEFINITION OF TERMS

To ensure clarity and consistency in the use of terminology, the following definitions are

provided:

1. Imaginary Numbers: Numbers that can be expressed in the form a + bi, where a and b

are real numbers and i is the imaginary unit, equal to the square root of -1.

2. Financial Analysis: The process of evaluating the financial data and performance of a

company or organization, with the goal of making informed decisions and

recommendations related to investments, risk management, and other financial

activities.

3. Risk Management: The process of identifying, assessing, and mitigating risks associated

with financial investments and activities, with the goal of reducing the likelihood and

impact of negative outcomes.

4. Portfolio Optimization: The process of selecting and allocating investments in a portfolio,

with the goal of maximizing returns while minimizing risk.

5. Linear Algebra: A branch of mathematics that deals with linear equations, matrices, and

vector spaces, and is commonly used in financial modeling and analysis.

6. Calculus: A branch of mathematics that deals with the study of rates of change and

accumulation and is commonly used in modeling financial trends and risks.

7. Differential Equations: Mathematical equations that describe the rate of change of one or

more variables and are commonly used in modeling complex systems and phenomena,

including financial markets and trends.

8. Financial Modeling: The process of creating mathematical models that represent

financial data and performance, with the goal of making predictions and informed

decisions related to investments, risk management, and other financial activities.

9. Global Market: The interconnected network of financial markets and exchanges around

the world, where financial instruments and assets are traded and exchanged.