Bill walks past a little newspaper shop and is confused when he sees that the newspaper's selling price is $5.40 when he just saw it at a supermarket for $3.00. He asks the owner if this store why this is the case.
Excuse me sir, my name is bill. Can you explain why the newspapers here are more expensive then the newspapers at the supermarket.
Well, that's because us retailers need to make a profit. Which is where the selling price is greater then the cost price.
Isn't a selling price and cost price the same thing?
No they are completely different. The cost price is how much retailers pay to get goods and selling price is how much retailers sell them to you for.
OH! But what if the selling price isn't greater then the cost price.
Then that my friend is a loss. Here, if I as a retailer bought this for $4.50, how would I make a 20% profit.
Well, first you would have to find 20% of the original amount so you would multiply 4.50 by 20 over 100 which equals 0.90. Know add 0.90 to the original amount.