Financial maths is needed for all jobs, from calculating wages to working out profit, loss and VAT. Knowledge of financial maths is also required to be able to understand bank statements and savings.
In its simplest sense, profit is the money made after expenses. If the expenses are more than the money received then it's considered a loss.
A profit is a positive number and a loss is a negative number.
Example
John buys items from a car boot sale. He then sells the items on an internet auction site.
The table shows some information about the items that John has bought and sold in a week.
Item
Bought
Sold
Profit or loss
CD
拢5.00
拢7.50
拢2.50 profit
Board game
拢7.00
拢10.00
Toy car
拢1.00
拢1.20 profit
Jigsaw
拢12.00
拢5.00 loss
DVD
拢9.00
拢7.50
Item
CD
Bought
拢5.00
Sold
拢7.50
Profit or loss
拢2.50 profit
Item
Board game
Bought
拢7.00
Sold
拢10.00
Profit or loss
Item
Toy car
Bought
拢1.00
Sold
Profit or loss
拢1.20 profit
Item
Jigsaw
Bought
Sold
拢12.00
Profit or loss
拢5.00 loss
Item
DVD
Bought
拢9.00
Sold
拢7.50
Profit or loss
Fill in the missing gaps and work out the total profit or loss for the five items.
Board game: The difference between the bought and sold prices is 拢3.00. As the item was sold for more than it was bought, it represents 拢3.00 profit.
Toy car: The item was bought for 拢1.00 and had a 拢1.20 profit when it was sold. This means the item was sold for more than it was bought. So \(\pounds 1.00 + \pounds 1.20 = \pounds 2.20\).
Jigsaw: The item was sold for 拢12.00 and this was a 拢5.00 loss. This means the item was sold for less than it was bought. So \(\pounds 12.00 + \pounds 5.00 = \pounds 17.00\).
DVD: The difference between the bought and sold prices is 拢1.50. As the item was sold for less than it was bought it represents 拢1.50 loss.
By considering the profit and loss of the 5 items as positive and negative numbers, the items represent: \(+2.5 +3 +1.2 -5 -1.5 = +0.2\)