About Profit and loss formula
Profit and loss formulas are used to determine how much money was made or lost when a product was sold. They're mostly utilized in commercial and financial transactions to show how much profit or loss a trader made on a certain transaction.
What is the profit and loss formula?
The phrases profit and loss are used to determine whether or not a transaction is lucrative. We must first comprehend the terms selling price' and 'cost price' before moving on to the profit and loss formula. The cost price of a product is the price at which it is purchased. The selling price is the price at which a product is sold. When the selling price is higher than the cost price, the difference is referred to as profit. When the selling price is lower than the cost price, the difference is referred to as a loss.
Profit loss formula
When the selling price and cost price are known, the profit is calculated using the following formula: Selling price (S.P.) - Cost price = Profit (C.P.)
The basic formula for determining the loss when the selling price and cost price are known is: Cost price (C.P.) - Selling price = Loss (S.P.)
Derivation of profit and loss formula
- If you grasp the terms selling price' and 'cost price,' the profit and loss calculations are easy to understand.
- The cost price of an item is the price at which it is purchased.
- The price at which an object is sold is known as the selling price.
Profit Formula
Now, if the selling price of a thing is more than its cost price, the transaction is profitable. In other words, a profit is made when an item is sold for a higher price than it was purchased for. This is how the profit formula is created.
Profit = Cost Price - Selling Price
Loss Formula
Similarly, the loss formula can be calculated using the selling and cost prices. If a thing is sold for less than the price at which it was purchased, the transaction is considered a loss. There is a loss in the transaction if the product's cost price is higher than its selling price.
Loss = Cost Price - Selling Price
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