P & L III

Profit and loss is one of the most significant topics for CAT and other management entrance exams.
Though appearance of questions from the topic in CAT has been sporadic, in other management entrance
exams, questions from this area have featured on a regular basis.

Key concepts discussed:

Cost price of an article is the price at which the article is bought.

Selling price of an article is the price at which the article is sold.
Marked price of an article is the lable or list price of the article.
Profit/Loss is the difference between the selling price and the cost price. If the difference is positive,
it is called profit; and if is negative, it is called loss.

Pr ofit / Loss
100
CP
Margin is the profit as a percentage of SP.
Discount is the reduction made on the marked price.
Mark-up is the difference between the list price and the cost price.
Pr ofit / Loss percentage =

Highlight: This session deals with a mixed bag of questions pertaining to the area. The session has a
couple of questions based on faulty balance.

Session

P&L

The questions discussed in the session are given below along with their source.
Q1.

A dishonest dealer sells his goods at the cost price and still earns a profit of 25% by under weighing.
What weight does he use for a kilogram?
(a) 750 gm.
(b) 800 gm.
(c) 825 gm.
(d) 850 gm.
(FMS 2005)

Q2.

Instead of a metre scale, a cloth merchant uses a 120 cm scale while buying, but uses an 80 cm
scale while selling the same cloth. If he offers a discount of 20% on cash payment, what is his
overall profit percentage?
(a) 20%
(b) 25%
(c) 40%
(d) 15%
(CAT 1996)

DIRECTION for Question 3: The question given below is followed by two statements, I and II.
Mark the answer as:
(a)
if the question cannot be answered even with the help of both the statements taken together.
(b)
if the question can be answered by any one of the two statements.
(c)
if each statement alone is sufficient to answer the question, but not the other one.
(d)
if both statements I and II together are needed to answer the question.
Q3.

What is the cost price of the article?

I. After selling the article, a loss of 25% on cost price is incurred.
II. The selling price is three-fourths of the cost price.
(CAT 1996)

DIRECTION for Question 4: The question given below is followed by two statements, I and II.
Mark the answer as:
(a)
if the question can be answered by one of the statements alone, but cannot be answered by using
the other statement alone.
(b)
if the question can be answered by using either statement alone.
(c)
if the question can be answered by using both the statements together, but cannot be answered by
using either statement alone.
(d)
if the question cannot be answered even by using both statements together.
Q4.

P&L

A dress was initially listed at a price that would have given the store a profit of 20% of the wholesale
cost. What was the wholesale cost of the dress?
A. After reducing the listed price by 10%, the dress sold for a net profit of $10.
B. The dress is sold for $50.
(CAT 2002)

Session

DIRECTION for Question 5: The following problem comprises a question followed by two statements
labeled (1) and (2) Mark the answer as:
(a) If you can get the answer from (1) alone but not from (2) alone.
(b) If you can get the answer from (2) alone but not from (1) alone.
(c) If you can get the answer from both (1) and (2) together but not from (1) alone or (2) alone.
(d) If you cannot get the answer from (1) and (2) together and need more data.
Q5.

Profits of an Indian multinational over a 4-year period averaged Rs.22 crore. If the company made
profits in all 4 years, in which of the years were the profits greatest?
(1) In the 4th year, the profits of the company were thrice the average of its profits for the first 3
years.
(2) Profits of the company were twice as great in the 2nd year and thrice as great in the 3rd year as
in the 1st year.
(SNAP 2004)

Q6.

A company purchases components A and B from Germany and USA respectively. A and B form 30%
and 50% of the total production cost. Current gain is 20%. If the USA dollar becomes cheap by 12%
over its original cost and the cost of German mark increased by 20%, what will be the gain? (The
selling price is not altered.)
(a) 10%
(b) 20%
(c) 15%
(d) 7.5%
(CAT 1998)

Session

P&L