# How to Easily Solve Profit and Loss Problems using Effective Percentages

### Smart Methods are a blessing in exams like SBI PO, IBPS and SSC CGL. Read this post for a smart method to solve Profit and Loss Problems.

A frequently asked topic in competitive exams like SBI PO, IBPS and SSC CGL, Exam Profit and Loss problems can be very time consuming and also need you to remember a long list of formulas that can be confusing and difficult. But you don’t need to worry because we have a smart method that will solve this problem for you.
In the last blog posts in this series of smart methods, this trick will help you solve profit and loss problems in 5- 10 seconds that would otherwise take 30- 45 seconds.

### Profit and Loss

The price at which an article is purchased by the seller is called its => Cost Price (CP).
The price at which an article is sold is called its => Selling Price (SP).
Profit or Gain => The difference between SP and C.P (if SP is greater than CP)
Loss => The difference between CP and SP (if CP is greater than SP)

Now, this is a list that we all know verbatim since childhood and have sworn by it while solving all problems related to profit and loss.

### Formulas to Solve Profit and Loss Problems

Now this is the super long list that we spent nights mugging up in school and probably still swear by.

### Example of Profit and Loss Problems

A shopkeeper marks his goods in such a way that even after allowing a discount of 20%, he makes a profit of 12%. How much percent above the cost price is the marked price?
1) 32%      2) 8%      3) 12%      4) 40%      5) None of theses

### Conventional Method to Solve Profit and Loss Problems

Standard approach to the above question starts with mentally going through the list of formulas after reading the question. Then you replace the values in the equation and solve it.
 Step 1: Assuming ‘M’ to be the marked price we get, S= [ (100- 20)/100] x M= 80M/ 100 --- (i) Step 2: Assuming ‘C’ to be the cost price we get, S= [(100+ P)/ 100] x C = 112C/ 100 --- (ii) Step 3: From (i) and (ii), 80M/100 = 112C/100 Step 4: M= 112C/ 80 = 1.4C Step 5: M= 140%  of CP Therefore the Marked Price is 40% above the Cost Price

### Smart method to Solve Profit and Loss Problems

The correct answer of course! But just too many formulas, assuming variables, forming equations, equating variables and then solving it… All this takes almost 40 seconds, which is definitely not the time you can afford to spend on it in an exam. Times to solve the same question with a smarter method, to save some time and reduce some steps by using Effective Percentages.
We know the formula for effective percentage is A= B + C + (B x C)/ 100

Step 1:
Using the above formula we get P = D + M + (DxM)/100
12 = -20 + M + (-20 x M)/100

Step 2:
M – M/5 = 12 + 20

Step 3:
4M/5 = 32
M = 40
Therefore Marked Price is 40% above the Cost Price
Watch our expert faculty explain this time saving smart method.
Try solving the following profit and loss problems using this smart method-

Question 1: A shopkeeper marks his goods in such a way that after allowing a discount of 10%, he gains 17%. How much percent above C.P. is the marked price?
1) 50%      2) 30%      3) 27%      4) 7%      5) None of these

Question 2: A shopkeeper marks his goods in such a way that after allowing a discount of 20%, he gains 28%. How much percent above C.P. is the marked price?
1) 60%      2) 32%      3) 48%      4) 56%      5) None of these

Do write your answers in the comments below along with the time you saved on using this smart method.

Keep using these smart methods and keep practicing!