Let cost price of an item be $C$, selling price be $S$. Assume the seller makes a profit.
Then profit would be: $P = S – C$.
Now, what is the formula for calculating Profit Percentage?
- $P \% = \dfrac{P}{C} \times 100$
- $P\% = \dfrac{P}{S} \times 100$
Which one is right and why?
Best Answer
They are both right.
The first expresses the profit as a percentage of the cost price. This is the profit mark-up.
The second expresses the profit as a percentage of the sales price. This is the profit margin.
Percentage profit on its own doesn't mean anything unless you are talking mark-up or margin. By convention, in a module I teach, percentage profit means profit mark-up.