Business Mathematics

Business Mathematics is related to business which comprises mainly profit, loss and interest. Maths is the base of any business. In business, we deal with the exchange of money or products, which have a monetary value. Each business leads to some profit and some loss. To identify these factors, we have to study the primary topics of Maths such as formulas to find a profit, loss, their percentages, discount, etc. We will discuss here all the related terms with their definitions.

While doing business, one can earn a good profit or face loss. The price of a product is fixed, taking into consideration it’s cost price, profit, margin, trade discount, cash discount, etc. The price marked on the commodity is called marked price or catalogue price. For trading purposes, the manufacturer proposes a discount on the MRP to the buyer. This is called a trade discount. In addition to the trade discount, if the buyer pays cash against goods, he gets another cut called cash discount. The price of the object after subtracting the trade discount and cash discount is called the selling price. Thus, we have, Selling price = Cost price – Discounts.

Definition of Business Math

Business Math always deals with profit or loss. The cost of a product is fixed by taking into consideration it’s profit, margin, cash discount, trade discount, etc. Business maths is used by commercial companies to record and manage business works. Commercial businesses use maths in departments of accounting, inventory management, marketing, sales forecasting and financial analysis. The main categories in business math are:

  • Money math
  • Paying taxes
  • Interest
  • Investing
  • Saving
  • Profit and loss and etc

Terms in Business Math

  • Selling Price: The market price is taken to sell a product.
  • Cost Price: The original price of the product is the cost price.
  • Profit: If the selling price is more than the cost price, the difference in the prices is the profit.
  • Loss: If the selling price is less than the cost price, the difference in the prices is the loss.
  • Discount: The reduced amount in the selling price of a product.
  • Simple Interest: Simple interest is that interest which is counted against the capital amount or the portion of the main amount that remains unpaid.
  • Compound Interest: Compound interest is the investment rate that increases exponentially.

Profit and Loss

A profit is the gained amount received by a business on selling a product whereas loss is the amount which is less than the actual price of the product. The formula for profit and loss is given based on the selling price and cost price of a commodity.

  • Profit = Selling Price – Cost Price = S.P. – C.P. (S.P. > C.P)
  • Loss = Cost Price – Selling Price = C.P. – S.P. (C.P. > S.P.)

Both these measures have their percentage value also and they are given by;

  • Profit% = (S.P. – C.P.)/C.P. x 100 = Profit/C.P. x 100
  • Loss% = (C.P. – S.P.)/C.P. x 100 = Loss/C.P. x 100

Now let us solve some examples based on these formulas.

Examples

Q.1: A music system was bought for Rs.10,500 and sold at Rs.9,500. Find the profit or loss.

Solution: Given,

Cost Price of the music system = Rs.10,500

Selling Price of the music system = Rs. 9,500

We can see here, C.P. is greater than S.P. Therefore, there is a loss in this business.

Hence, we need to calculate the loss amount.

Loss = C.P. – S.P.

Loss = 10,500 – 9,500 = Rs.1,000/-.

Question 2: A pair of shoes is bought at Rs 200 and sold at a profit of 10%. Find the selling price.

Solution: Given,

Profit = 10% of Rs.200

P = (10/100) × 200 = Rs. 20

S.P. = C.P. + Profit

S.P. = 200 + 20 = Rs.220/-.