## Profit Formula and Some Important Terms Related to it

Profit is a term that is generally used by all of us on a daily basis. You might have been in a profit or a loss situation in monetary terms many times in your life. We use the profit formula frequently without giving it much thought. In this article, we will try to find out the profit formula, some important terms related to it such as cost price and the selling price, derivation of profit formula and some examples related to it. We will also see how Cuemath can help you excel in these concepts and make your mathematics base strong.

## What is the Profit Formula?

Profit is a term commonly used where someone gains financially. Before going into the profit formula, we should know about some basic terms related to it such as cost price and selling price.

The price at which a product is bought or purchased is known as cost price. Similarly, the price at which a product is sold is known as its selling price. Now, if the selling price is more or higher than the cost price, then it means you are in a profitable situation, thus you are in profit. On the other hand, if the cost price is greater than the selling price, it signifies you are in a losing situation, thus you are at a loss. Let us now look at the profit formula.

If the selling price and cost price are known, then the basic formula for arriving at a profit is:

Profit formula = S.P – C.P

where S.P is the selling price and C.P is the cost price. We can calculate the profit by using this simple formula. Let us now look at the derivation for profit formula.

## Derivation of Profit Formula

The derivation for profit formula is very convenient and easy to understand if the terms, selling price, and cost price are clear to us. Cost price is the price at which an item is bought whereas selling price is the price at which an item is sold. Profit can only be earned in a transaction if the selling price is more than that of the cost price. In other words, if the price at which an item is bought is lower than the price at which an item is sold, then profit is earned. This is how the profit formula is derived.

## Some Examples Related to Profit Formula

We will try to find out the profit in a transaction if an item is bought at 20 rupees and sold at 50 rupees?

In this case,

Selling price = 50 rupees

Cost price = 20 rupees

Now using the profit formula.

S.P – C.P (S.P is selling price and C.P is the cost price)

50 rupees- 20 rupees = 30 rupees.

Thus, in this transaction, a profit of 30 rupees has been made.

Let us see another example for finding the profit. We will try to find out the profit in a transaction if the item is bought at 10 rupees and sold at 15 rupees?

In this case,

Selling price = 15 rupees

Cost price = 10 rupees

Now using the profit formula.

S.P – C.P

15 rupees – 10 rupees = 5 rupees

Thus, in this transaction, a profit of 5 rupees has been made.

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