Introduction about Profit Formula

What Is Profit?

Profit is the income remaining after deducting all expenses. It is one of the most important terms used widely in business. Profit formula is generally used when describing business activities or to calculate the gain in any financial transactions. The other name of profit is net income as it is the amount left over after deducting all the expenses for that particular period. 

What Is Known As Profit Formula?

The profit formula is used to know how much profit a business has made after selling a particular product. The profit formula is widely used in business and financial transactions. Profit generally arises when the selling price of any product is more than its cost price. On the other hand, loss arises when the cost price of a product is more than its selling price.

It should be noted that in a day-to-day business transaction, both profit and loss are represented as a percentage. It shows how much profit or loss a trader has attained from a particular deal. Learn more real-life applications of this formula on cuemath website.

Important Profit Formulas:

Profit = Selling Price (SP) – Cost Price(CP)

Profit Percentage =  ProfitCost Price 100

What Is Cost Price and Selling Price?

Cost Price: Cost Price also known as CP is the price at which the product was originally brought.

Selling Price: Selling Price, also known as SP, is the price at which the product was sold. 

Let us understand the profit formula using an example:

Profit Formula Example

A shopkeeper bought lunchboxes in bulk for Rs. 100 each. He sold them for Rs. 120 each. Find the profit and profit percentage?


Selling Price of Lunch Box = Rs. 120

Cost Price of Lunch Box = Rs. 100

Using Profit Formula 

Profit =  Selling Price (SP) – Cost Price(CP)

Profit = 120 – 100

Profit = Rs. 20

Therefore, the profit on each lunchbox is Rs. 20.

Profit %  = ProfitCost Price 100

Profit % =  20100 100 

= 20.

The profit percentage of the shopkeeper will be Rs. 20.

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