Profit percentage is a measure used to evaluate how much profit is made from a business or transaction in relation to its cost or revenue. It is often used to assess the profitability of a product, investment, or business venture.
Formula for Profit Percentage:
- Profit Percentage based on Cost Price (CP):
Profit Percentage=(Cost PriceProfit)×100
Where:
- Profit = Selling Price (SP) – Cost Price (CP)
- Profit Percentage based on Selling Price (SP):
Profit Percentage=(Selling PriceProfit)×100
Where:
- Profit = Selling Price (SP) – Cost Price (CP)
Examples
Example 1: Profit Percentage based on Cost Price
- Cost Price (CP): $50
- Selling Price (SP): $70
Step 1: Calculate the profit:
Profit=Selling Price−Cost Price=70−50=20
Step 2: Calculate the profit percentage:
Profit Percentage=(5020)×100=40%
So, the profit percentage based on the cost price is 40%.
Example 2: Profit Percentage based on Selling Price
- Cost Price (CP): $60
- Selling Price (SP): $80
Step 1: Calculate the profit:
Profit=Selling Price−Cost Price=80−60=20
Step 2: Calculate the profit percentage:
Profit Percentage=(8020)×100=25%
So, the profit percentage based on the selling price is 25%.
Conclusion
The profit percentage formula helps businesses determine how much profit they are making relative to their cost or sales price. By understanding the profit percentage, companies can assess the efficiency of their pricing strategy and profitability.
