Profit Percentage Formula

Suppose you go to a shopping complex to buy a shirt. You finally liked one shirt and went on to see its price tag, but on seeing it, you are shell shocked. The price which is written on the price tag is 2500. Then you go to the owner of the complex and him for some good discount, and after a bit of chit-chat, he agrees to give you a discount of 20%. Now calculate what the exact amount that you need you to need to pay for the shirt is. 

If your calculations give you an answer, which is 2000 rupees, then you are absolutely correct. You are supposed to pay the sum after subtracting 20% of the amount of what’s written on the price tag, which is 500 of 2500. Now what this example has done is that it has introduced you to the concepts of marked price and discounts. The valuable key point that you have learned from this small example is that the discount which is calculated is only calculated on the marked price. 

Now let us assume In another case that the shopkeeper who is selling the shirt to you has himself bought it at a price of 1600 rupees. Here the question is that how much the shopkeeper has earned from this sell of his. Initially, the shopkeeper has invested a sum of 1600 rupees in buying the shirt and sold it at a price of 2000 rupees, which gives him a profit of 2000-1600= 400 rupees. The profit that he has earned is after putting rupees 1600 from his own pocket to make a profit of rupees 400, which means that his Percentage profit is 100×400/1600 = 25%. 

After reading this whole example, the concept of cost price and profit must have become very clear to you. To be even more lucid, the price which you put down In front of the seller to buy something is called its cost price, and the difference between the prices at which the seller buys the commodity and the price at which he sells it to you is called profit. The profit percentage is calculated at the cost price. The type of problems related to profit and loss is essential for almost every competitive exam. 

In order to solve these sorts of questions, you must understand the basic concepts related to it.

  • Cost price– The basic price which is paid to acquire a product initially is called its cost price. Any sort of expenses related to taxes, transportation, etc. are included in it.
  • Selling price– The final amount of money which is, at last, received i.e., the final price at which the product is disposed of, is called it’s selling price. 
  • Marked price– The Price which is marked on the product is called it’s marked price. 
  • Profit– The difference between the selling price and the cost price when the selling price is higher is called profit.

Then there is a very basic formula which is used to calculate profit percentage, and it is called profit percentage formula which is given by-

Profit%= 100×profit/cost price.

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About the Author

Rachit believes in the power of education and has studied from the top institutes of IIIT Allahabad, IIM Calcutta, and Francois Rabelias in France. He has worked as Software Developer with Microsoft and Adobe. Post his MBA, he worked with the world’s # 1 consulting firm, The Boston Consulting Group across multiple geographies US, South-East Asia and Europe.

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