Profit Formula

The profit formula is used when we want to know if we have gained any profit on selling a product. The profit formula helps in generating the percentage of profit that has been gained in either a business or while making a financial transaction. Revenue and benefits are the main words associated with profit. The profit formula helps in creating revenue for the short term and the long-term helps in determining the profit. Let's learn about the profit formula with a few solved examples in the end.

What is Profit Formula? 

The profit formula helps in denoting the profit made by selling a particular product, usually seen in business and financial transactions. The formula for denoting the profit is used when the selling price of any product sold is greater than the price at which the product was originally bought. So, profit is the difference between the price sold and the cost of a product. Hence, the formula to calculate the profit is: 

Profit = Selling Price - Cost Price or  Profit = S.P. - C.P.

Profit Formula

Profit Formula for a given cost price and selling price of any product can be expressed as:

Profit = Selling Price - Cost Price

Profit can be calculated when the selling price is greater than the cost price. For a smaller selling price, the value for profit would be negative, which means that the trader has experienced loss in the deal.

Different Profit Formulas

Some other important formulas related to profit are:

Name	Formulas
Profit Percentage Formula	Profit Percentage = (Profit × 100)/C.P.
Gross Percentage Formula	Gross Profit = Revenue - Cost of Goods Sold
Profit Margin Formula	Profit Margin = (Total Income/Net Sales)×100
Gross Profit Margin Formula	Gross Profit Margin = (Gross Profit/Net Sales)×100

Where, 

• C.P. = Cost Price of the article, i.e. the cost at which the article was originally bought
• S.P. = Selling Price of the article, i.e. the cost at which the article is sold

Examples Using Profit Formula

Example 1: A shopkeeper buys juice cans in bulk for $25 each. He sells them for $30 each. Calculate the profit and the profit percentage. 

Solution:     

To find: Profit and profit percentage 

Given: 

Cost price of the juice can = $25

Selling price of the juice can = $30

Using Profit Formula,

Profit = $30 - $25

          = $5

Using Profit Percentage Formula,

Profit Percentage = (5 × 100)/25 = 20%

Therefore, profit on the given purchase and sale is $5 and the profit percentage is 20%.

Example 2: On selling a table for $840, a trader makes a profit of 5%. Calculate the cost price of the table and the profit trader makes on the sale.

Solution:       

To find: Cost price of the table, Profit

Given: 

The selling price of the table = $840

Profit Percentage = 5%

Using Profit Formula,

Profit = 840 - C.P.

Also, from Profit Percentage Formula,

5 = (profit × 100)/C.P.

5  C.P. = (840 - C.P.)100

C.P. = (840 - C.P.) 20

C.P. = 16,800 - 20 C.P.

21 C.P. = 16,800 

Cost Price = $800

Therefore,

Profit = $840 - $800 = $40                                                                                                     

Hence, the cost price of the table is $840 and the profit is $40.

Example 3: Ben buys a dozen pencil boxes for $85 each and sold them to his friends for $100 each. Do you think Ben profited from this? If yes, then how much profit did Ben make?

Solution: 

To find: Profit 

Given: 

Cost price of the juice can = $85

Selling price of the juice can = $100

Using Profit Formula,

Profit = $100 - $85

          = $15

Hence, yes Ben did make a profit out of it and he earned $15 as profit.