The profit and Loss term is used to find the price of the commodity in the market. This formula is used to find how a business can go profitable. It could also be said that this term can also be used in a real-life situation to understand the profit in a detailed manner. Every product holds a cost price as well as the price on what it is sold. Following these two price values, it becomes easy to understand the gained profit or the occurred loss in the context of a price. The significant term is known for covering the cost price, variable, fixed cost, selling price, etc.
It would be counted as a profit if the selling price of a commodity is higher compared to the cost price. But if a commodity’s cost price is higher than the selling price then it will be counted as a loss.
Reasons To Use Profit and Loss Term –
The motto of profit and loss terms is identifying if a deal is going to be profitable or not. These terms are indeed used more often in our regular lives. If you sell a product more than its cost price then the deal is going to be profitable indeed. But if the selling price is indeed less than the actual cost price then the deal will be counted as a loss. Cost price is the price on what a product is bought indeed. The price at which you sell your product is regarded in the form of a selling price.
To understand the basics, you need to have clarity about the used terms. Cost price is all about the price you paid to buy the product. For example, if you bought an office chair for $25, then $25 is that cost price. It is also called C.P.
And the product sold at a specific price is called the selling price. For example, you sold the same office chair for $30 then $30 is the selling price. It is also called S.P.
If the selling price is more than the cost price then it is called the profit price indeed. It means you will be making a profit indeed. You can calculate it following the formula which is Profit = Selling price – Cost price.
You are going in loss if you sell products at less price compared to the cost price. For example, if you bought an office chair at $25 but you sold it for $16 then you incurred a loss of $7. Now, you might be wondering what is the formula to calculate the loss. You need to follow this formula: Loss=Cost price-Selling price.
You might be finding these formulas a bit tricky but they are not. All you need to understand and focus on is the basics. Once you understand them, they are easy to calculate. It would be helpful to do some exercises to get good at all of them. You must not skip this chapter thinking that it is not that important. Generally, questions come from this chapter. Apart from it, these subjects do lift your intelligence as well. Some chapters in Mathematic are important to cover such as profit and loss, Determinants, and so on. They also help you in real life too. Therefore, you must not ignore these at all.
Conclusion –
It could be said that it is an interesting term. It does not only help you in your syllabus but real life too. It could also be said that it makes your brain sharper indeed. To get good at it, you may also take help of the sample questions easily available online.