QA – Basics of Profit and Loss

Suppose you go to a shop and try to buy a laptop. The label on the laptop says Rs 38,000. This is called the Marked Price.

You start bargaining with the shopkeeper and he agrees to sell it to you for Rs 35,000. This is the Selling Price.

Let’s suppose that he bought it for Rs. 30,000 from the manufacturer. This will be the shopkeeper’s Cost Price.

If you subtract the cost price from the selling price, he earned Rs 35,000 – 30,000 = Rs 5,000 from the transaction. This means that he earned a profit of Rs. 5000.

Thus,

Profit/Loss = Selling price – Cost price.

Now, the shopkeeper wants to know his profit in percentage terms. So what is his profit percent?

The formula to find percentage Profit / Loss is:

Profit / Loss% = (Profit or Loss/C.P.) * 100 %

Thus, in this case Profit % = (5,000 / 30,000) * 100 %

= 16.67%

Similarly to find Cost Price and Selling Price we have:

C.P. = (S.P. × 100) ÷ (100 +/- profit %) [the negative sign would be used in case of a loss]

S.P. = (100 +/- profit %) × C.P ÷ 100

Now, suppose a friend of yours bought a movie DVD for Rs. 625 and you found out that the store owner made a profit of 25% from this sale. So, what was the cost price of the D.V.D for the store owner?

C.P. = (S.P. × 100) ÷ (100 + profit %)

= (625 * 100) / (100 + 25) = (62500 / 125) = Rs. 500

The formula to find Discount and Discount percentage on a product:

Discount = Marked Price – Selling Price

Discount % = (Discount/ Marked Price) × 100%

Example: The marked price of a shirt was Rs 400 and its selling price was Rs 350. Find the discount and Discount percent.

Discount = 400 ― 350 = Rs 50

Now, by using the percentage formula, we can calculate the discount percent.

Discount % = (Discount/ Marked Price) × 100%

D% = (50/400) × 100% = 12.5%

Faulty Wieghts:

Profit % = [(Weight claimed – Actual weight given)/Actual weight given] * 100%

or Profit % = (Extra weight retained by seller/Actual weight given) * 100%

Example: A very smart trader cheats both his supplier and his customer by using faulty weights. When he buys from the supplier, he takes 10 percent more than the indicated weight and when he sells to the customer, he gives 10 percent less than the indicated weight. Can you calculate the overall profit percentage of the trader?

Explanation:

While buying from the supplier, suppose the indicated weight is 1 kg (i.e. 1000 grams).

Now, the trader has cheated the supplier by using faulty measures and takes 10 percent more than the indicated weight.

So, the total weight comes to 1000 + [(10/100)*1000] = 1100 grams (1.1 kg)

Thus, the trader bought 1100 grams from the supplier and paid for only 1000 grams.

Now, the trader cheated the customer and sold 10 percent less than the indicated weight.

So, while selling to the customer, if the indicated weight is 1000 grams (1 kg), the actual weight given to the customer is 1000 – [(10/100)*1000] = 900 grams

So, when the trader sells 1 kg, he actually gives only 900 grams and retains 200 grams (note that he has cheated the supplier too and so, he acquired 1100 grams).

Now, applying the formula:

Profit % = (Extra weight retained by seller/Actual weight given) * 100%

Profit % = (200/900) * 100%

Hence, Profit % = 22.22%

    Read Next