Profit and Loss
Profit and Loss has always been an important chapter for all competitive exams. Beside, all management entrance exams like CAT, SNAP, CMAT, MAT, ATMA as well as Bank P.O. exams extensively use questions from this chapter.
CONTENT
• Cost price and selling price
• Profit / Loss
• Mark-up and Marked price
Cost Price and Selling Price
Cost Price (CP)
The price at which a person buys a product is the cost price of the product for that person. In other words, the amount paid or expended in either purchasing or producing an object is known as its cost price.
Selling Price (SP)
The price at which a person sells a product is the sales price of the product for that person. In other words, the amount got when an object is sold is called as the Selling Price of the object from the selling’s point of views.
Profit and Loss
When a person is able to sell a product at a price higher than its cost price, we say that he has earned a profit. That is,
If SP > CP then it’s Profit
Profit = Selling Price (SP) – Cost Price (CP)
Similarly, if person sells an item for a price lower than its cost price, we say that a loss has been incurred.
If SP < CP then it’s Loss
Loss = Cost Price (CP) – Selling Price (SP)
It must be noted here that the selling price of seller is the cost price of the buyer.
Profit % = [ (SP - CP) / CP ] * 100
Loss % = [ (CP - SP) / CP ] * 100
Percentage Profit and Loss is always calculated on CP unless otherwise stated.
Profit Margin and Loss margin
Profit Margin = [(SP - CP) / SP] * 100
Loss Margin = [(CP - SP) / SP] * 100
For the same SP and CP,
Profit Percentage > Profit Margin
Loss Percentage < Loss Margin
Mark-up and Marked Price
CP + Mark-up = Marked Price (= SP if no discount)
Mark-up (kind of a Profit)
Increment on cost price before making it available to the customer.
Marked Price (MP)
Price as displayed on the item (also known as List price, Tag price, MRP etc.)
Mark-up = Marked price – cost price
Mark-up % = [(MP - CP) / CP] * 100
Discount
Reduction given on the marked price before selling to customer
Discount = MP – CP
Discount % = [(MP - CP) / MP] * 100
ALL THE BEST!!!
