[Maths Class Notes] on Profit Formula Pdf for Exam

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Profit is a measure of the benefit gained by a corporation or an individual from the employment of capital or assets, or from refraining from such use. Profit is equal to the number of goods produced (or total productive output) minus the cost used up in producing those goods. 

With the help of profits, a corporation will be able to develop its capabilities and thus round off its activities. the formula of profit helps a corporation to make a sustainable profit. if a person knows about profit and loss and wants to be a loyal and successful entrepreneur, then he must know how it works.

Revenue and Total Revenue

Revenue is the inflow of cash or other assets that are linked with an increase in net worth for a business concern. It’s not all sales and income, but only the part of sales and income that is associated with increases in shareholder equity retained earnings and cash flow. Revenue is the amount of income obtained from the activity of selling and delivering goods and services. Revenue is a quantitative measure of the amount in money, by business activities, with the assistance of an enterprise.

Profit = total revenue – total cost

Total Revenue is the combined total of sales revenues and other revenues. Revenue that is obtained from the activity of selling and delivering goods and services are called sales revenues whereas other revenues are income that is obtained from other business activities. Revenue can be broadly classified into two types, i.e., Sales revenue and other revenues.

Formula Profit and Loss

Profit is the net income and is also the number of earnings that exceeded expenses for the tenure of time. Simply say, profit is the amount of income that is in surplus after performing all the requisite and matched expenses deducted for the period. It is only the amount of profit that encourages an individual, specifically a businessman to undertake a business.

Profit or Gain Formula = Selling Price (S.P) – Cost Price (C.P)

Loss Formula = Cost Price (C.P) – Selling Price (S.P)

Profit Percentage Formula

One of the most significant mathematical formulas, profit and loss formulas are used to calculate not only many maths problems but are quite crucial in our daily life. These formulas are greatly applicable in small and large businesses, retail, corporate sectors, and those linked with finance besides the calculations involved at an academic level.

Importance of Profit Percentage Formula

In retail, profit and loss formulas are used to identify the price of a product/service in the market. Every commodity in the market comes with a cost price and a selling price. With the help of these allocated price values, we can calculate the profit gained and also the loss of money in a specific product/service. For any seller or trader, if the value of the cost price is less than the selling price of a commodity, then it’s a profit but if the value of the selling price is less than the cost price, then it’s a loss for him.

Operating Profit Formula

To calculate the operating margin, we need to divide operating income (earnings) by sales (revenues). Operating margin is a profitability ratio that depicts the amount of profit that a company/seller makes from its core operations concerning the total revenues it brings in. That said the formula to calculate operating profit margin is as follows:

Operating Profit Margin Formula = Operating Income (earnings) ÷ sales (Revenue).

Calculate Operating Profit From Gross Profit

It is the difference between total revenue earned from selling a commodity and the total cost of goods/services sold.

Gross Profit (GP) = Net Sales – COGS (Cost of Goods Sold)

Operating Profit = Gross Profit (GP) – Operating Expenses.

Important Definitions in Profit and Loss

Loss is the amount that a seller incurs when the selling price is lesser than the cost price. This difference in the amount is the loss incurred for the period. Note that selling price is the price at which an article or a service is sold.

Important Formulas to Calculate Profit and Loss

Element Formula

Profit

Selling Price – Cost Price

Loss

Cost Price – Selling Price

Profit %

Profit / Cost Price × 100

Loss %

Loss / Cost Price × 100

Selling Price (SP)

(100+Gain/Profit × CP)

Selling Price (SP)

(100−Loss × CP)

Cost Price (CP)

100/(100+Gain/Profit × Selling Price (SP)

Cost Price (CP)

100/(100–Loss × Selling Price (SP)

Solved Examples

Example 1: A student bought a bag for Rs. 350 and later sold it for Rs. 400. Find the profit percentage he earned.

Solution: 

Profit = SP – CP

= 400 – 350 = 50.

Gain% = (50/350) × 100

= 100/7%

Example 2: A man sold a painting for Rs. 525. Find the cost price if he incurred a loss of 9%.

Solution:

CP = 100/(100–Loss × SP)

Thus, the cost price of the painting= (100/91)*525 = Rs. 576.90

Example 3: In a transaction, a seller incurred a profit percentage of 70% of the cost. If the cost is further increased by 10% however the selling price remains the same, calculate the reduction in profit percentage?

Solution:

Suppose that Cost Price (CP) = Rs. 100.

Then Profit = Rs. 70 and SP = Rs. 170.

The cost increases by 10% → New CP = Rs. 110, SP = Rs. 170.

Profit % = 60/110 * 100 = 55.54%.

Hence, Profit decreases by 45.45%.

Example 4: If profit% of M and N are the same on selling the articles at 2400 each, but A calculates his profit on s.p. while B calculates it on c.p. This profit is equal to 25% each. What is the difference between their profit?

Solution:

Let the Cost price of M and N be m, n respectively.

Now for M,

2400-m/2400 = 25/100

After calculating m = 1800

Again for N,

2400-n/n = 25/100

After calculation ‘n’ = 1920

So the profit of M = 600(2400 – 1800)

And Profit of N = 480(2400-1920)

Hence the difference between their profit = 120

Fun Facts

Conclusion:

Marked price is the price at which a seller lists a commodity for selling. Gross Profit or Gross Margin is the difference between the selling price and the cost price. Operating Profit Margin is a profitability ratio that depicts the amount of profit that a company/seller makes on its revenues. Loss is the amount that a seller incurs when the selling price is lesser than the cost price. 

Profit is the amount that a seller earns when the selling price is greater than the cost price. Gain/Profit is always calculated on the SP (selling price). Loss/Loss is always calculated on the CP. Thus, Profit % = Gain/Profit *100 and Loss % = Loss/Loss * 100. The difference between the two is the percentage of gain or loss.