Profit and Loss
The quantitative section of the CAT can make or break your shot at your dream B-school. But fear not, for within its domain lies a potent weapon – Profit and Loss (P&L). Mastering this fundamental concept unlocks a treasure trove of high-scoring opportunities.
However, the CAT isn’t just about rote memorization. P&L throws curveballs. Imagine buying apples at different prices – a weighted average price becomes necessary to determine your overall CP. Discounts can be tricky too. Applying successive discounts in the correct order (highest percentage first) ensures you maximize your savings. Markup and markdown further complicate matters. Understanding the distinction between adding a profit percentage (markup) and subtracting a discount (markdown) to the CP to find the SP is key to navigating these scenarios.
Basic Definition
- Cost price (CP)
Cost price is the buying price or the price incurred to manufacture any product.
- Selling price (SP)
Selling price is the price at which the product is sold.
- Profit or Gain
When the selling price of the product is higher than its cost price there is a profit or gain.
| Remember
Profit and loss are always calculated on cost price and is represented as a percent of cost price, unless otherwise stated.
|
This is the difference between selling price (SP) and cost price (CP).
- Loss
When the cost price of the product is higher than its selling price then there is loss.
This the difference between cost price (CP) and selling price (SP).
- Market price (MP)
The price printed on the label is called the market price or list price.
- Discount
Reduction made on purchase is called discount. A discount is generally given on the market price (MP) of an item in percentage terms.
Concepts
Important concept to note.
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