Understanding Profit And Loss-www.q1se.com

Further, the Level of Difficulties at which questions are set in the various exams can be set as under: LOD I: CAT, XLRI, IRMA, IIFT, CMAT, Bank PO aspirants, MAT, NIFT, NMAT, and SNAP exam and all other management exams. LOD II: CAT, XLRI, IRMA (partially), etc. LOD III: CAT, XLRI (students aiming for 60% plus in Maths in CAT). Profit & Loss are part and parcel of every .mercial transaction. In fact, the entire economy and the concept of capitalism is based on the so called Profit Motive. Profit & Loss in Case of Individual Transactions We will first investigate the concept of Profit & Loss in the case of indivi The price at which a person buys a product is the cost price of the product for that person. In other words, the amount paid or expended in either purchasing or pro- ducing an object is known as its cost price (also written as CP). The price at which a person sells a product is the sales price of the product for that person. In other words, the amount got when an object is sold is called as the Selling Price (SP) of the object from the sellers point of view. When a person is able to sell a product at a price higher than its cost price, we say that he has earned a profit. That is, If SP > CP, the difference, SP CP is known as the profit or gain. Similarly, if a person sells an item for a price lower than its cost price, we say that a loss has been incurred. The basic concept of profit and loss is as simple as this. If, however, SP < CP, then the difference, CP SP is called the loss. It must be noted here that the Selling Price of the seller is the Cost Price of the buyer. Thus we can say that in the case of profit the following formulae hold true: 1. Profit = SP CP 2. SP = Profit + CP 3. CP = SP Profit 4. Percentage Profit = Profit*100/CP Percentage Profit is always calculated on CP unless otherwise stated. Notice that SP = CP + Gain = CP + (Gain on Re 1) CP = CP + (Gain%/ 100) CP In case of loss 1. Loss = CP SP 2. SP = CP Loss 3. CP = SP + Loss Precentage Loss is always calculated on CP unless otherwise stated. The above situation (although it is the basic building block of Profit and Loss) is not the normal situation where we face Profit and Loss problems. In fact, there is a wide application of profit and loss in day-to-day business and economic transactions. It is in these situations that we normally have to work out profit and loss problems. Having investigated the basic concept of profit and loss for an individual transaction of selling and buying one unit of a product, let us now look at the concept of profit and loss applied to day-to-day business and .mercial transactions. Profit & Loss as Applied to Business and .mercial Transactions Profit & Loss when Multiple Units of a Product are Being Bought and Sold The basic concept of profit and loss remains unchanged for this situation. However, a .mon mistake in this type of problem can be avoided if the following basic principle is adopted: Profit or Loss in terms of money can only be calculated when the number of items bought and sold are equal. That is, Profit or Loss in money terms cannot be calculated unless we equate the number of products bought and sold. This is normally achieved by equating the number of items bought and sold at 1 or 100 or some other convenient figure as per the problem asked. Overlooking of this basic fact is one of the most .mon mistakes that students are prone to making in the solving of profit and loss problems. About the Author: SNAP exam Question answer. He also blogs for their Fans and followers and provide the solution of their query, with this blog he wants to share his knowledge . He wel.es any questions or .ments you might have on his posts. 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