Profit formula is used to know how much profit has been made by selling a particular product. Formula for profit is majorly used for business and financial transactions. Profit arises when the selling price of any product sold is greater than the cost price (that is the price at which the product was originally bought). It should be noted that the profit and loss as a percentage is generally used to depict how much profit or loss a trader gets from a particular deal.
Formulas to Calculate Profit
The Profit Formulas are given as:
Formula for Profit | Profit = S.P – C.P. |
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Formula for Profit Percentage |
Profit Percent Formula = \(\frac{Profit\times100}{C.P.}\) |
Gross Profit Formula |
Gross Profit = Revenue – Cost of Goods Sold |
Profit Margin Formula |
Profit Margin = \(\frac{Total\;Income}{Net\;Sales}\) |
Gross Profit Margin Formula |
Gross Profit Margin = \(\frac{Gross\;Profit}{Net\;Sales}\) |
Notation Used in Profit Formula
- S.P. = Selling Price i.e. the cost at which the product is sold
- C.P. = Cost price i.e. the cost at which the product is originally bought
Articles Related to Profit Formula
Example Question Using the Formula for Profit
Question: A shopkeeper buys watch in bulk for Rs. 20 each. He sells them for Rs. 45 each. Calculate the profit and the profit percentage?
Solution:
Given,
Selling price of the watch = Rs. 45
Cost price of the watch = Rs. 20
Now, Profit = Selling Price – Cost Price
So, profit of the watch = 45 – 20 = Rs. 25
We know the formula for profit percentage as:
Profit % = Selling Price – [(Cost Price) / Cost Price] × 100
Or, Profit % = (Profit / C.P.) × 100
So, The profit percentage of the shopkeeper will be (25 / 20) × 100 = 1.25 × 100 = 125%.
It can be said that the shopkeeper made a profit of Rs. 25 from each watch with a profit percentage of 125%.
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