Profit Formula
The profit formula is used to calculate the amount of gain that has been made in a transaction. When the Selling price of a product is greater than its Cost price, a profit is earned. This makes up the basic profit formula which further helps in generating the percentage of profit that has been earned in a business or while making a financial deal. Let us learn more about the profit formula in this article.
What is Profit Formula?
The profit formula helps in calculating the profit earned by selling a particular product, usually in a business, or, to calculate the gain in any financial transaction. Profit can be calculated when the selling price is greater than the cost price. Hence, the formula to find the profit is:
Profit = Selling Price (S.P.) - Cost Price (C.P.)
Where,
- The Cost Price of the product is the cost at which it was originally bought.
- The Selling Price of the product is the cost at which it was sold.
It should be noted that when the selling price is less than the cost price, there is a loss in the transaction.
Different Profit Formulas
Since profit is a generic term, it is used for small and big transactions. For small-scale transactions, the basic profit formula given above is used. When bigger transactions take place in businesses, then terms like gross profit and net profit are used. These include terms like total sales, revenue, the overall profit percentage of a firm over a period of time, and so on. Some important formulas related to profit are given below:
| Name | Formulas |
|---|---|
| Profit Percentage Formula | Profit Percentage = (Profit/Cost Price) × 100 |
| Gross Profit Formula | Gross Profit = Revenue (Sales) - Cost of Goods Sold |
| Net Profit Formula | Net Profit = Gross profit - Expenses |
Profit Percentage Formula
Profit percentage (%) is the amount of profit expressed in terms of percentage. This profit is based on the cost price, hence, the formula to find the profit percentage is: (Profit/Cost Price) × 100.
Examples Using Profit Formula
Example 1: A shopkeeper bought a pack of pencils for $25 and sold it for $30. Calculate the profit and the profit percentage.
Solution:
Cost price of the pack of pencils = $25; Selling price = $30
Using the Profit Formula, Profit = Selling Price - Cost Price
Profit = $30 - $25 = $5
Using the Profit Percentage Formula, Profit Percentage = (Profit/Cost Price) × 100
Profit Percentage = (5/25) × 100 = 20%
Therefore, the profit earned in the deal is of $5 and the profit percentage is 20%.
Example 2: On selling a table for $840, a trader makes a profit of $130. Calculate the cost price of the table.
Solution:
The selling price of the table = $840; Profit = $130
Using the Profit Formula, Profit = Selling Price - Cost Price
130 = 840 - Cost Price
Cost price = $710
Hence, the cost price of the table is $710.
Example 3: Mr. Ben bought a bag for $85 and sold it for $100. Do you think he made a profit in this transaction? If yes, then how much profit did he make?
Solution:
Cost price of the bag = $85; Selling price of the bag = $100. Since the selling price is more than the cost price, there is profit in the transaction.
Using the Profit Formula,
Profit = $100 - $85 = $15
Therefore, Mr. Ben made a profit of $15.
FAQs on Profit Formula
What is Profit Formula?
When the Selling price of a product is greater than its Cost price, a profit is earned. This profit is calculated using the profit formula. In other words, the profit formula is used to calculate the profit earned by selling a particular product, usually in a business, or, to find the gain made in any financial transaction. The basic profit formula is expressed as, Profit = Selling Price - Cost Price
What is the Gross Profit Formula?
Gross profit is the profit that a business makes after the manufacturing and selling costs are subtracted from the total sales. The formula to calculate the gross profit is, Gross Profit = Total Sales (revenue) - Cost of goods sold.
What is the Net Profit Formula?
Net profit is the amount of money earned by a business after all the operating expenses, interest and tax expenses are deducted from the Gross profit. This means in order to find the net profit we need to know the gross profit. Therefore, the formula that is used to find the Net profit is, Net Profit = Gross profit - Expenses.
What is the Formula to Calculate the Profit?
The basic formula that is used to calculate the profit in a business or a financial transaction, is: Profit = Selling Price - Cost Price. Here,
- Cost Price (CP) of a product is the cost at which it was originally bought.
- Selling Price (SP) of the product is the cost at which it was is sold.
What is the Profit Percentage Formula using Selling Price?
The basic formula to find the profit percentage remains the same. However, the method varies according to the given values.
- When the selling price and the cost price of a product is given, the profit can be calculated using the formula, Profit = Selling Price - Cost Price. After this, the profit percentage formula that is used is, Profit percentage = (Profit/Cost Price) × 100.
- In other cases, when the selling price and the profit is given, we first find the Cost price using the formula, Cost price = Selling price - Profit. After this step, the profit percentage can be calculated using the formula, (Profit/Cost Price) × 100.
What is the Profit Percentage Formula?
Profit is always based on the Cost price. To calculate the percentage of profit earned from a particular sale, the formula that is used is:
Profit Percentage Formula = (Profit/C.P.) × 100
Where, C.P. = Cost Price of the article, i.e., the cost at which the article was originally bought.
What is the Profit Earned by Buying Chocolates at $20 each and selling them at $30 each?
Cost price = $20; Selling price = $30; Using the Profit Formula, Profit = Selling Price - Cost Price
Profit = $30 - $20 = $10
Therefore, the profit earned is $10