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What is Percentage Profit (Profit/Cost × 100)?
Grade Level:
Class 5
Finance, Economics, Maths, Business, AI
Definition
What is it?
Percentage Profit tells us how much profit a business makes for every 100 rupees spent on buying or making an item. It helps us understand the profitability of a business in relation to its cost. It is calculated as (Profit / Cost Price) × 100.
Simple Example
Quick Example
Imagine you buy a pack of colourful pens for ₹50. You then sell them to your friend for ₹60. Your profit is ₹10. To find the percentage profit, you would see what percentage ₹10 is of the original ₹50 you spent.
Worked Example
Step-by-Step
Rohan buys a box of laddoos for ₹200. He sells them for ₹250.
Step 1: Find the Profit.
Profit = Selling Price - Cost Price
Profit = ₹250 - ₹200 = ₹50
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Step 2: Identify the Cost Price.
Cost Price = ₹200
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Step 3: Apply the Percentage Profit formula.
Percentage Profit = (Profit / Cost Price) × 100
Percentage Profit = (₹50 / ₹200) × 100
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Step 4: Calculate the fraction.
₹50 / ₹200 = 1/4 or 0.25
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Step 5: Multiply by 100.
Percentage Profit = 0.25 × 100 = 25%
Answer: Rohan's Percentage Profit is 25%.
Why It Matters
Understanding percentage profit is key for anyone running a shop or even just selling old toys. Business owners use it to set prices and decide if a product is worth selling. It's also important in careers like finance, economics, and business management to evaluate company performance.
Common Mistakes
MISTAKE: Using Selling Price instead of Cost Price in the denominator. | CORRECTION: Always divide the profit by the Cost Price (the original amount spent) to find percentage profit.
MISTAKE: Forgetting to multiply by 100 at the end. | CORRECTION: After dividing Profit by Cost Price, always multiply the result by 100 to convert it into a percentage.
MISTAKE: Confusing Percentage Profit with just Profit. | CORRECTION: Profit is an amount of money (e.g., ₹50), while Percentage Profit is a ratio expressed as a percentage (e.g., 25%).
Practice Questions
Try It Yourself
QUESTION: A bookseller buys a book for ₹120 and sells it for ₹150. What is the percentage profit? | ANSWER: 25%
QUESTION: Shreya bought a handmade craft item for ₹400 and sold it for ₹480. Calculate her percentage profit. | ANSWER: 20%
QUESTION: A vegetable vendor purchased 10 kg of potatoes for ₹300. He sold 8 kg at ₹40 per kg and the remaining 2 kg at ₹20 per kg. What is his total percentage profit? | ANSWER: 40%
MCQ
Quick Quiz
A shopkeeper buys a toy for ₹80 and sells it for ₹100. What is the percentage profit?
₹20
20%
25%
80%
The Correct Answer Is:
C
The profit is ₹100 - ₹80 = ₹20. Percentage Profit = (Profit / Cost Price) × 100 = (₹20 / ₹80) × 100 = (1/4) × 100 = 25%. Option B is incorrect because it is the profit percentage if calculated on selling price, not cost price.
Real World Connection
In the Real World
From a local chai shop owner deciding the price of a cup of chai to a big e-commerce company like Flipkart calculating the profit on a mobile phone sale, percentage profit is used everywhere. It helps businesses understand how well they are performing and make smart decisions about pricing and inventory.
Key Vocabulary
Key Terms
PROFIT: The money gained when the selling price is more than the cost price. | COST PRICE: The original price at which an item is bought or made. | SELLING PRICE: The price at which an item is sold. | PERCENTAGE: A way to express a number as a fraction of 100. | DENOMINATOR: The bottom part of a fraction, representing the total number of parts.
What's Next
What to Learn Next
Great job learning about percentage profit! Next, you can explore 'Percentage Loss' and 'Discount Percentage'. These concepts will help you understand more about how businesses handle situations where they lose money or offer sales, building on your understanding of percentages.
