Profit Percentage Formula

Formula to Calculate Profit Percentage

The profit percentage formula calculates the fiscal benefits left with the entity after it has paid all the expenses and is expressed as a percentage of cost monetary value or sell price. Profit percentage is of two types : –
a ) Markup expressed as a percentage of monetary value price .
b ) profit margin which is the percentage calculated using the sell price .
The profit percentage formula is calculated as follows : –

Profit % (Markup) = (Profit / Cost Price) * 100
Profit % (Margin) = (Profit / Revenues) * 100

Profit-Percentage-Formula
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Calculation Examples of Profit Percentage

Let us see some bare to promote examples to understand them better .
You can download this profit share Formula Excel Template here – profit percentage Formula Excel Template

Example #1

due to heavy demand by CPA and CFA candidates, Joseph, the stationery shop class owner, purchased 150 pieces of convention calculators at $ 35 per piece and 80 pieces of fiscal calculators at $ 115 per piece .
He spent an sum of $ 2,500 on transportation and other charges. He labeled the normal calculators with $ 50 and fiscal calculators at $ 150. He besides decided to provide a discount rate of 5 % on every calculator .
now, he wants to know the net income share earned by him .
Solution:
Use the below-given datum for the calculation of the profit share formula .

Quantity Cost Price Selling Price  Discount Transportation Cost
150 35 50 5% 2500
80 115 150 5%

calculation of profit can be done as follows : –
Example 1.1.0
net income = 18,525 – 16,950
profit will be : –
Profit Percentage Formula Example 1.2
Profit = $1,575
calculation of profit percentage can be done as follows :
Example 1.3
= ( 1,575 / 16,950 ) * 100
profit share will be : –
Profit Percentage Formula Example 1.4

Example #2

The annual gross made by Wayne Inc. Ltd., a foot-ware manufacture company, amounted to $ 100,000 million in the previous year based on the ship’s company ’ second actual receipts and payments. The cash profit is 1 % of revenues. The credit sales Credit Sales Credit Sales is a transaction type in which the customers/buyers are allowed to pay up for the buy detail later on rather of paying at the exact time of leverage. It gives them the needed time to collect money & make the payment. read more ( not included in annual revenues ) amounted to $ 2300 million. In addition, Wayne Inc. Ltd. charges a annual disparagement of $ 800 million on its assets .
The management of Wayne Inc. Ltd. wants to find script profits and calculate the profit share for both books .
Solution:
Use below given data for the calculation of profit percentage .

  • Annual Revenues: $100,000
  • Cash Profit: 1%
  • Credit Sales: $2,300
  • Depreciation: $800

calculation of Cash Profit will be –
Profit Percentage Formula Example 2.1
Cash Profit = 100,000 * 1 % =1,000 .
calculation of Book Profit Book Profit Book Profit is the net income sum that a occupation earns from its operations & activities but has not been realized yet. It is not tracked by analysts or stakeholders & its calculation is relevant lone to evaluate a Company ’ second tax liability. read more can be done as follows : –
Example 2.2
Book Profit = 1,000 – 800 + 2,300
Book Profit will be : –
Profit Percentage Formula Example 2.3
Book Profit = $ 2,500.

calculation of book net income percentage formula can be done as follows : –
Example 2.4
= 2,500 / ( 100,000 + 2,300 ) * 100
Book profit share will be : –
Profit Percentage Formula Example 2.5

Example #3

Mr. Bruce Wayne, a start-up investor, wants to invest in a new IT start-up based on the project ’ s profitableness. That means the idea that shows a higher net income % will be eligible for fund allotments .
oracle and Adobe, two companies, present their ideas with the have a bun in the oven gross generation and consort costs .
Advice Mr. Bruce Wayne to decide which company should be selected per the criteria .

Income Statement Oracle Adobe
Revenue $1,000.00 $2,250.00
Cost of Goods Sale (COGS) $200.00 $550.00
Gross Profit $800.00 $1,700.00
Operating Expenses $600.00 $1,300.00
Operating Profit $200.00 $400.00
Taxes @ 30% $60.00 $120.00
Net Profit $140.00 $280.00

Solution:
calculation of net income percentage for Oracle can be done as follows :
Profit Percentage Formula Example 3.1
= ( 140/ 1,000 ) * 100
profit % for Oracle will be : –
Example 3.2
calculation of profit share for Adobe can be done as follows : –
Profit Percentage Formula Example 3.3
= ( 280 / 2,250 ) * 100
profit share for Adobe will be : –
Example 3.4

Conclusion

adobe shows higher revenues of $ 2,250,000 and higher web profits of $ 280,000 in its income statements than Oracle, with revenues and final profits of $ 1,000,000 and $ 140,000, respectively. But, on calculating both companies ’ profit percentages, Oracle outperforms Adobe with a net income percentage of 14 % for Oracle and 12 % for Adobe. Hence, Mr. Wayne should select Oracle based on profit share for fund allotment .

Example #4

Suppose Mr. Bruce Wayne won $ 10 million in a lottery five years ago and invested all of it in a diversify portfolio as follows : –

Income Statement Allocation (%) Amount
Real Estate Properties 25% 2500000.00
Equity Market or Stocks 40% 4000000.00
Government Bond or Debt Funds 20% 2000000.00
Fixed Deposits 10% 1000000.00
Cash in Savings Account 5% 500000.00
Total 100% 10000000.00

Example 4.1
# After five years, he conducted a valuation of all of his assets and investments at a holocene point in prison term. As per the stream evaluation, he wants to know the net profit share during five years .
The current evaluation of his portfolio is shown as follows : –
Profit Percentage Formula Example 4.3
calculation of net net income can be done as follows : –
Example 4.4
final profit = 10,350,000 – 10,000,000
internet profit will be –
Profit Percentage Formula Example 4.5
Net profit = $350,000
The calculation can be done as follows :
Example 4.6
=350,000 / 10,000,000 * 100
profit percentage will be : –
Profit Percentage Formula Example 4.7

Conclusion

Mr. Wayne allocated the soap helping in the equity market and stocks, resulting in negative returns ascribable to depressions in global and domestic markets. still, since he diversified his portfolio into versatile assets, he ultimately ended up with a net income share of 3.5 % and earned $ 350,000 on its overall investment.

Relevance and Use of Profit Percentage Formula

  • Profit percentage is a top-level and the most common tool to measure the profitability of a business. It measures the ability of the firm to convert sales into profits. i.e., 20% means the firm has generated a net profit of $20 for every $100 sale.
  • It not only gauges the capacity of the management to generate higher sales/ revenues but also considers how efficiently it reduces its costs.
  • The standard profitability indicator suggests that profit percentage comprises two components: –
    • Sales and expenses
    • Profit Percentage equation = (Net Sales – Expenses) / Net Sales or 1 – (Expenses / Net Sales)
    • So if one could minimize the expenses ratio to net sales, it could achieve a higher profit percentage.
    • Therefore, one can either increase the sales or lower the costs/expenses.

Recommended Articles

This article has been a template to the net income percentage recipe. We discuss the profit share calculation, examples, and a downloadable Excel template here. besides, you can learn more about the financial statement analysis from the following articles : –

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