Categories: Business

Explain the Concept of Profit and Loss with Examples

The profit and loss formula is a mathematical formula that is used to calculate the selling price of a product and to determine how profitable a company is. There is a cost price and a selling price for any product. We may measure the profit or loss made for a specific product based on the values of these prices. The terms cost price, fixed, variable, selling price, market price, and semi-variable cost are all discussed here. 

For a merchant, for example, if the sale price of a product is higher than the cost price, it is a profit; if the cost price is higher than the selling price, it is a loss. In this post, we’ll go over benefit and loss principles, as well as how to solve problems based on them. Profit and loss concepts are used in retail to calculate the selling price of a product. There is a cost price and a sale price for any product on the market. We can measure the profit made as well as the loss of money in a specific product using the values of these rates. If the value of the sale price is greater than the cost price of a commodity for any shopkeeper or seller, it is profit for the seller.

Profit and Loss Basic Concepts

Let us discuss profit and loss concepts in maths. It can be explained in terms of cost price and selling price.

Profit (P)

The amount or sum gained by selling a product with more than its estimated cost price.

Loss (L)

The amount or sum the seller attains after selling the element less than its cost price is mentioned as a loss in business.

Cost Price (CP)

The amount paid for a product or service to purchase is called a cost price. Also, expressed as CP. This cost price is further classified into two different kinds:

  • Fixed Cost: The fixed cost is constant and not variable, it doesn’t vary under any circumstances
  • Variable Cost: It could vary depending on the number of units purchased or sold.

Selling Price (SP)

The amount at which the product is sold is called the Selling Price of the product. It is usually expressed as SP. Also, sometimes called a sale price of the product.

Marked Price Formula (MP)

This is commonly labeled by shopkeepers to offer a discount to the local customers.

Profit and Loss Examples

  • If a seller brings a note for Rs.120 and sells it for Rs.140, then he has made a profit of Rs.20/-.
  • If a buyer has bought a textile material for Rs.200 and he has to sell it for Rs.100/-, then he has gone through a loss of Rs.100/-.
  • Suppose, Raiya brings a football for Rs. 500/- and he sells it to his comrade for Rs. 650/-, then Raiya has made a profit of Rs.150

These are some very common examples of the profit and loss concept in real life, which we observe regularly in our day-to-day activities.

Profit and Loss Formulas

Now let us discuss the profit formula and loss formula.

  • The profit or gain is exactly equal to the selling price minus the cost price.
  • Loss is equal to the cost price minus the estimated selling price.

Conclusion

Visit the website cuemath.com to know more about the concepts and sub-topics of profit and loss. The concepts of profit and loss are very vital and important because these mathematical operations are needed in our daily activities.

From calculating the price of a normal household commodity to see if you made any profit while shopping, you need the working and understanding of profit and loss. Visit website Cuemath.com that helps students practice important questions regularly, which will help enhance and engage their math automaticity and accuracy skills.

Salman Ahmad

I am Salman Ahmad an Engineer by choice, Blogger, YouTuber, and an Entrepreneur by passion. I love technology in my day to day life and loves writing Tech Articles on Latest Technology, Cyber Security, Internet Security, SEO and Digital Marketing. Blogging is my passion and I own some popular sites https://techowiser.com/, https://barlecoq.com/, https://geeksaroundworld.com/, https://elitesmindset.com/, https://bluegraydaily.com/, https://minibighype.com/, https://factoryextreme.com/ & https://piticstyle.com/. I am super active on my social media accounts. You can connect with me on Instagram/Facebook/Twitter @TechloverSAhmad.

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