12 Learning Outcomes earning Outcomes • To understand cost price, selling price, profi t and loss, and profi t margin.
• To distinguish between simple interest and compound interest and to solve problems involving both.
• To understand AER and APR. • To solve problems on depreciation by the reducing balance method.
Financial Maths 2
12.1 Buying and selling
Profi t and loss 1. Profi t
WORKED EXAMPLE Calculating percentage profi t
A man buys a painting in an auction for €150. He sells it three years later for €450. The price at which you buy something is known as the cost price (CP). The cost price of the painting: CP = €150 The price at which you sell something is known as the selling price (SP). The selling price of the painting: SP = €450 The man has made a profi t (P) of €300. His profi t: P = SP – CP = €450 – €150 = €300 He has made this profi t on a purchase price of €150.
His percentage profi t: (%P) = 300 ____
150 × 100% = 200%
Percentage profi t (%P) = Profi t _________ Cost pr ice × 100%
Percentage profi t is also known as percentage mark-up. The profi t margin is the percentage of the selling price that is turned into profi t.
