Things to Contemplate on 22-Dec-2019:
Saw a news headline about a trader got a GST reminder to pay Rs. 5.9858630140000004 due asap. Look at the ridicule- and let me explain: We Indians tend to do things which will complicate the existing pattern, thinking that it shows the genius, intellect of the person who does it. But needless to say it is pointless to be so accurate in the context. It may be pertinent to be very accurate in Rocket Science or Astronomical calculations, but silly for a person to pay that amount. We have very disproportional concept of accuracy. Many of us have heard of “Margin of Errors” or “Total Significant Digits” which will help in understanding why it’s nonsensical or farcical.
A small set of
examples may be worth mentioning:
- For Accounting: no places of decimal, ex.- 23,76,548
- For measuring Height / Weight: 1 place of decimal, ex.- 171.1 cm / 68.3 kg
- For Rupee & Paise: 2 places of decimal, ex.- 23.82
- For expressing Total Units held in MF: 3 places of decimal, ex.- 879.354
- For expressing NAV in MF: 4 places of decimal, ex.- 15.4793
- For Forex conversion: 5 places of decimal, ex.- 71.62783
- For Dividend Declaration in MF: 6 places of decimal, ex.- 2.987654
These figures are
conventionally expressed in these ways, but if someone says he is 175.456789 cm
tall and weighs 74.98674 kg - it looks and sounds ridiculous.
A word about the
“Total Significant Digits”: The bigger the number is, the less numbers appear
after decimal. Ex.- Rs. 46.55 makes some meaning- say the price of any article,
but Rs. 45,56,765.43 is meaningless- say the annual income of a small company,
because 43 paise is insignificant at 45.5 Lakh odd rupees. Similarly for a
Crore a few rupees are insignificant. The Total Significant Digits refer to the
number of continuous digits before and after a zero- in this case we have 8
significant digits. The general norm is 5 or 7 significant digits Like 234.45,
2,344.5, 23,445, or 2,34,450 and so on.
