## Profit and Loss

Profit and Loss–Practice different types of aptitude test for free, including numerical and verbal tests. All questions come with worked solutions to help you improve.

They are mainly used in business and financial transactions to depict how much profit or losses a trader has incurred from any particular deal.

## Derivation of Profit and Loss Formula

The derivation of the formulas is simple to understand if the terms ‘selling price’ and ‘cost price’ are clear.

**Cost price:** The price at which an item is purchased.

**Selling price:** The price at which an item is sold.

Now, if the selling price of a product is more than its cost price, there is a profit earned in the transaction. In other words, if a product is sold at a higher price than the price at which it was bought, then a profit is earned. This is how the formula for profit is derived.

**Profit = Selling Price – Cost Price**

### Profit Loss Formula

When the selling price and cost price are known, the basic formula for calculating the profit is:

**Profit = Selling price (S.P.) – Cost price (C.P.)**

When the selling price and cost price are known, the basic formula for calculating the loss is:

**Loss = Cost price (C.P.) – Selling price (S.P.)**

Formula for Profit and Loss Percentage

In some cases, after the profit or loss is calculated, it is converted in the form of a percentage. It is used to express the amount of profit or losses incurred in the form of a percentage. This helps in comparing two quantities. The formulas for profit and loss percentage are given below:

- Profit percentage(P%) = (Profit /Cost Price) × 100
- Loss percentage(L%) = (Loss / Cost price) × 100
- S.P. = {(100 + P%)/100} × CP(if SP > CP)
- S.P. = {(100 – L%)/100} × CP(if SP < CP)
- C.P. = {100/(100 + P%)} × SP(if SP > CP)
- C.P. = {100/(100 – L%)} × SP(if SP < CP)