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
£5.00
£7.50
£2.50 profit
Board game
£7.00
£10.00
Toy car
£1.00
£1.20 profit
Jigsaw
£12.00
£5.00 loss
DVD
£9.00
£7.50
Item
CD
Bought
£5.00
Sold
£7.50
Profit or loss
£2.50 profit
Item
Board game
Bought
£7.00
Sold
£10.00
Profit or loss
Item
Toy car
Bought
£1.00
Sold
Profit or loss
£1.20 profit
Item
Jigsaw
Bought
Sold
£12.00
Profit or loss
£5.00 loss
Item
DVD
Bought
£9.00
Sold
£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 £3.00. As the item was sold for more than it was bought, it represents £3.00 profit.
Toy car: The item was bought for £1.00 and had a £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 £12.00 and this was a £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 £1.50. As the item was sold for less than it was bought it represents £1.50 loss.
By considering the profit and loss of the 5 items as positive and negative numbers, the items represent: \(+2.5 +3 +1.2 -5 -1.5 = +0.2\)