Money & Finance

5 minQuiz at the end

Profit and Loss

Profit = Selling price βˆ’ Cost price (when selling price > cost price) Loss = Cost price βˆ’ Selling price (when cost price > selling price)

Profit percentage = (Profit / Cost price) Γ— 100

Example: cost Β£40, sell Β£52: Profit = Β£12, profit% = (12/40) Γ— 100 = 30%

Simple Interest

Interest earned on the original principal only:

I = PRT/100 or I = P Γ— r Γ— t

Where: P = principal, R = rate (%), T = time (years)

Β£500 at 4% for 3 years: I = 500 Γ— 4 Γ— 3 / 100 = Β£60

Compound Interest

Interest is added to the principal each period, so the next period earns interest on the new total:

A = P(1 + r/100)ⁿ

Β£1,000 at 5% for 2 years: A = 1000 Γ— 1.05Β² = 1000 Γ— 1.1025 = Β£1,102.50

More than simple interest (which gives only Β£1,100) because interest earns interest.

VAT

Value Added Tax (VAT) is a tax added to the selling price of goods and services.

Price including 20% VAT: multiply by 1.20 Price excluding VAT: divide by 1.20

Budgeting

A budget is a plan for income and expenditure:

  • Income βˆ’ Expenditure = Surplus (positive) or Deficit (negative)

Sticking to a budget means spending does not exceed income.