Introduction

Profit and Loss Percentage

We use percentages to compare different businesses so we can see which one is performing better.

For the purpose of comparison, we usually express the actual profit or loss as a percentage of cost price.

This means we calculate how much we gained or lost out of every one hundred naira we spent.

Example to compare two items

Imagine a shopkeeper sold an item for 60 naira that he bought for 50 naira. He also sold another item for 110 naira that he bought for 100 naira. In both sales, the shopkeeper made a profit of 10 naira. If you just look at the money, it looks like he made the same gain.

But if we use percentage profit, the calculation will look like this:

Percentage Profit = 10 / 50 x 100% = 20% (First case)

Percentage Profit = 10 / 100 x 100% = 10% (Second case)

From this, you can see that in the first sale, he actually made more profit compared to what he spent. This shows that percentage is a better and more accurate way to compare business results.