Profit

Introduction  

Profit is one of the most important ideas in both business and mathematics. It tells us how much money is gained after selling a product or service for more than its cost. Whether it’s a small shopkeeper selling notebooks, a vendor selling shoes, or a large company recording its accounts, profit helps measure success and growth.

In this guide, we will learn what profit means, the different types of profit, the profit formula, and step-by-step examples of how to calculate profit and profit percentage. We will also learn why profit is important and how it is applied in real-life situations.

 

Table of Contents  

• What is Profit?
• Types of Profit
• Profit Formula
• Examples Using Profit Formula
• Importance of Profit in Business
• Conclusion
• FAQs On Profit

 

What is Profit?  

Profit is the money earned when a product is sold for more than what it cost. In easy words, if the selling price (SP) of a product is higher than its cost price (CP), the seller makes a profit.

Profit is the extra money gained after paying for all the costs like materials, rent, salaries, or even taxes. It shows how much a business actually earns from its work.

In simple terms:  

$\text{Profit}=\text{Selling Price}- \text{Cost Price}$

 

Types of Profit  

The main types of profit are gross profit, operating profit, and net profit. 

Gross Profit  

Gross profit is the money a business earns from selling its products after paying for the cost of making or buying those products. It does not include other expenses like rent, electricity, or salaries, just the cost of the product itself.

In simple words, gross profit shows how much money a business makes from sales alone, before paying for any other business costs. It helps the business know if it is earning enough from its core products.

Gross Profit Formula:  

$\text{Gross Profit}=\text{Revenue}- \text{Cost of Goods Sold}$

 

Operating Profit  

Operating profit is the money a business earns from its main activities after paying for the regular expenses needed to run the business. These expenses include things like electricity, rent, salaries, and other day-to-day costs.

In simple words, it shows how much profit the business makes from its normal operations, before paying taxes or interest. It tells us whether the business is running efficiently and making money from what it actually sells.

Operating Profit Formula:  

$\text{Operating Profit}=\text{Gross Profit}- \text{Operating Expenses}$

 

Net Profit  

Net profit is the final amount of money a business earns after paying for everything it needs to spend. This includes the cost of making or buying the product, operating expenses like rent, electricity, and salaries, as well as taxes and interest.

In simple words, it is the actual money left in the business after all the bills are paid. Net profit shows the real earnings that the business can use to save, invest, or grow further.

Net Profit Formula:  

$\text{Net Profit}=\text{Total Revenue}- \text{Total Expenses}$

Each of these types of profit helps measure different levels of profitability in a business.

 

Profit Formula  

The profit formula helps us find how much money is earned when we sell something. Profit is the extra money we get after selling a product for more than what it cost us.

Formula:
$\text{Profit} = \text{Selling Price} - \text{Cost Price}$

Example:  A shopkeeper buys a book for Rs.120/- and sells it for Rs.150/-. Find the profit gained by the shopkeeper.

Solution: Given Cost Price = Rs.120/-

And Selling Price = Rs.150/-

From the formula of profit, we know,

$\text{Profit}=\text{Selling Price}- \text{Cost Price}$

$\text{Profit}= 150-120$

$\text{Profit}= 30$

Therefore, the shopkeeper gains Rs 30/- from the business.

 

Profit Percentage Formula

Just knowing the profit amount is not always enough. Profit percentage tells us how much profit is earned for every 100 units of cost. This helps compare profitability across different items.

Formula:

$Profit\% =\left( \frac{Profit}{\text{Cost Price}} \right)\times 100$

Example:

A merchant buys a pair of shoes for Rs.400/- and sells it for Rs.480/-. Find the profit and profit percentage.

Solution: Given Cost Price = Rs.400/-

And Selling Price = Rs.480/-

From the formula of profit, we know,

$\text{Profit}=\text{Selling Price}-\text{Cost Price}$

$\text{Profit}=480-400$

$\text{Profit}=80$

$Profit\%=\left( \frac{Profit}{Cost Price} \right)\times 100$
$Profit\% =\left( \frac{80}{\text{400}} \right)\times 100$

$Profit\% =20\%$

Therefore, the merchant gains Rs.80/- from the business and the profit percentage is 20%.

 

Selling Price Formula

When you know the cost price (CP) of an item and the profit percentage, you can calculate the selling price by adding the profit to the cost. Profit is always calculated on the cost price.

Formula:
$SP = CP + \text{Profit}$

$SP = CP \times \left(1 + \frac{\text{Profit}\%}{100}\right)$

Example:
A man buys a chair for ₹800 and wants a profit of 20%.

Given:
Cost Price (CP) = ₹800
Profit % = 20%

Formula:
SP = CP × (1 + Profit% ÷ 100)

Solution:
SP = 800 × (1 + 20 ÷ 100)
SP = 800 × (1 + 0.2)
SP = 800 × 1.2
SP = 960

Answer: Selling Price = ₹960

 

Cost Price Formula 

When the selling price (SP) and the profit percentage are given, but the cost price (CP) is unknown. In such cases, we remove the profit portion from the selling price to calculate the cost price.

Formula:
$CP = \frac{SP}{1 + \frac{\text{Profit}\%}{100}}$

Example: A mobile phone is sold for ₹18,000 at a profit of 20%. Find its cost price.

Solution: Given Selling Price = ₹18,000/-And Profit % = 20%

From the formula of cost price, we know,

CP=SP1+Profit%100

CP=180001+20100

CP=180001.2

CP=15000

Therefore, the cost price of the mobile phone is Rs.15,000/-.

These formulas are used in many business calculations, retail pricing strategies, and accounting. If someone asks about the formula of profit, it simply refers to these expressions used to compute financial gain.

 

Examples Using Profit Formula 

Solve the profit and loss questions given below using the formulas you have learned. Write the steps carefully and calculate the profit, loss, or selling/cost price as needed.

 

Example 1: A retailer buys a notebook for Rs.30/- and sells it for Rs.45/-. Find the profit and profit percentage.

Solution: Given Cost Price = Rs.30/-

And Selling Price = Rs.45/-

From the formula of profit, we know,

$\text{Profit}=\text{Selling Price}-\text{Cost Price}$

$\text{Profit}= 45-30$

$\text{Profit}=15$

Profit%=(ProfitCost Price)×100

 

Profit%=(1530)×100

Profit%=50%

Therefore, the retailer gains Rs.15/- from the business and the profit percentage is 50%.

 

Example 2: A vendor buys a packet of cookies for Rs.120/- and sells it for Rs.150/-. Find the profit and profit percentage.

Solution: Given Cost Price = Rs.120/-

And Selling Price = Rs.150/-

From the formula of profit, we know,

$Profit = Selling Price – Cost Price$

$Profit = 150 - 120$

$Profit = 150 – 120$

Profit%=(ProfitCost Price)×100

Profit%=(30120)×100

Profit%=25%

Therefore, the vendor gains Rs.30/- from the business and the profit percentage is 25%.

 

Example 3:  A pair of shoes is sold for Rs.1,200/- at a profit of 25%. Find the cost price.

Solution: Given Selling Price = Rs.1,200/-

And Profit % = 25%

From the formula of cost price, we know,

CP=SP1+Profit%100

CP=12001+25100

CP=12001.25

$\text{CP}= 960$

Therefore, the cost price of the shoes is Rs.960/-.

 

Example 4:  A book is bought for Rs.150/- and the shopkeeper wants to make a profit of 10%. Find the selling price.

Solution: Given Cost Price = Rs.150/-

And Profit % = 10%

From the formula of the selling price, we know,

SP=CP×(1+Profit%100)

$\text{SP}=\text{150}\times \left( 1+\frac{\text{10}}{100} \right)$

$\text{SP}=150\times 1.1$

$\text{SP}=165$

Therefore, the shopkeeper should sell the book for Rs.165/- to earn 10% profit.

These examples show how the profit formula and profit percentage formula work together.

 

Importance of Profit in Business  

• Profit helps evaluate business performance.  

• It enables reinvestment and business growth.  

• Profitable businesses create jobs and pay taxes.  

• Measuring profit using types like gross, net, and operating profit provides deeper insights.  

• Understanding profit, using the profit formula, and calculating profit percentage is essential for making good business decisions.

 

Conclusion  

Understanding profit is important in both business and everyday life. Knowing what profit is, how to use the profit formula, and applying the profit percentage formula helps you make informed financial choices. The different types of profit, like gross, operating, and net, give a full view of a business’s financial health.  

Whether you're selling products, running a business, or studying commerce and mathematics, understanding profit formulas and applying them accurately leads to better outcomes. Mastering these concepts helps build a strong foundation for smarter budgeting, pricing, and tracking profitability.

 

Frequently Asked Questions on Profit

1. What do you mean by profit?

Answer: Profit is the financial gain obtained when the selling price of a product or service is more than its cost price.

2. What is the formula for profit?

Answer: The formula for profit is:
Profit = Selling Price  Cost Price

3. Is 7% a good profit margin?

Answer: A 7% profit margin is considered average or slightly low, depending on the industry. For some businesses, it may be acceptable; for others, it's below target.

4. What is a profit in math?

Answer: In mathematics, profit refers to the amount by which the revenue from sales exceeds the expenses or cost of goods sold.

 

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