Loss Percentage

Loss percentage is the percentage of money or assets lost when the cost price is more than the selling price. If a product is sold for lesser than its original cost, it results in a loss. The loss percentage gives a mathematical idea of the magnitude of the loss.

When an item is sold by the manufacturer for less than its purchase price, the manufacturer will face a loss. The loss percentage reveals exactly how much money is lost. Calculating the loss percentage can help businesses reevaluate their situation. Here is how to calculate the loss percentage.

Loss = Cost Price - Selling Price

Here, we subtract the selling price from the cost price.

To calculate loss percentage,

Loss Percentage = (Loss / Cost Price) × 100, where, cost price > selling price

We divide the loss by the cost price and then we multiply it by 100 to get the percentage.

For example, if a product costing $50 is sold for $40. What is the loss?

Find the loss:
Loss = Cost Price (C.P) - Selling Price (S.P)
Loss = $50 - $40 = $10

Find the Loss Percentage:
Loss Percentage = (Loss / Cost Price) × 100
Loss Percentage = (10/50) × 100 = 20%

Here are a few formulas related to loss percentage:

• Profit Percentage (P %) = (Profit / Cost Price) × 100

• S.P. = {(100 + P %) / 100)} × CP (if SP > CP)

• S.P. = {(100 - L %) / 100)} × CP (if SP < CP)

• C.P. = {100 / (100 + P %)} × SP (if SP > CP)

• C.P. = {100 / (100 - L %)} × SP (if SP < CP)

Where, S.P. is the selling price
C.P. is the cost price
P% is the profit percentage
L% is the loss percentage

Properties of loss percentage help us understand how loss affects the original amount and the selling price. Here are a few key properties to understand the loss percentage

• The more the loss, the greater is the loss percentage. 

• Loss percentage cannot be more than 100%, unless the selling price is 0, which doesn’t occur under normal circumstances.

• The loss percentage will always be positive because it represents the difference between the cost price and the selling price when the cost price is higher.

Every business or financial company needs to make smart decisions when it comes to profit and loss. Understanding the importance of loss percentage will help the business strategically. Let us take a look at why learning about loss percentage is crucial.

• Better Decision-making: Knowing how much money is lost helps in making better decisions. 

• Corrective Actions: Calculating the loss percentage is essential as it allows businesses to take corrective actions. 

• The Redemption: It also helps us plan our comeback. Reducing expenses, arriving at better purchase prices, or even increasing the sales price might benefit the business. 

Understanding loss percentage can be quite confusing so here are some tips and tricks to make loss percentage easy to understand:

• Understanding basics calculation of loss percentage, try to learn more about the difference between selling price, cost price, and loss. 

• Keep practicing the simple examples to get comfortable with loss percentage. Once you understand well enough, you can practice with harder examples.

• Memorize the formulas and make sure you understand what formula to use for the situation.

Loss percentage is used by businesses and companies daily. Here are a few more real-world applications:

• Inventory management: Most warehouses and retailers calculate loss due when an item is damaged, stolen, or spoiled.

• Stock markets: An investor would use the loss percentage formula to check how much money they have lost on their investments.

• Retail shops: Retail stores use loss percentage when selling products at a discount. They use loss percentage to understand how much they are losing from the original cost.