Percentages in business is a key part of the NUMERACY SKILLS FOR BUSINESS COURSE and Accounting Trainees and Bookkeepers need to calculate percentages.
So far in this course we have seen money expressed as a decimal and as a fraction. Money can also be expressed as a percentage e.g I gave him 50% of £10.00 or she had 25% of $25.00.
Per cent literally means one hundredth so 20% means 20 out of 100 – the denominator is always 100!
Percentages can be expressed either as decimals or fractions.
50% = 50/100 = 1/2 = 0.5
33.33% = 33.33/100 = 1/3 = 0.3333
Notice that the fraction 1/3 is not subject to rounding errors!
Let’s consider an example of percentages in business
A company makes a gross profit of 40% on its cost of sales. If its cost of sales were £200,000 how much was the gross profit?
£200,000 x 40% = £200,000 x 0.40 = £80,000
Decimals and fractions can also be converted to percentages. To change a decimal to a percentage you need to multiply by 100:
0.4 = 40%
0.65 = 65%
To change a percentage to a decimal you need to divide by 100:
50% = 0.5
5% = 0.05
To change a fraction to a percentage it is necessary to first change the fraction to a decimal:
3/5 = 0.6 = 60%
3/8 = 0.375 = 37.5%
Lets consider another example:
If a Van is sold for £220 plus VAT (Value Added Tax – a sales tax in the UK) at 20% then the actual cost to the customer is:
£220 + (20% of 220) = £220 + (0.2 x 220) = £264
The figure of £264 is known as the ‘gross’ price.
The figure of £220 is known as the ‘net’price.
If the van were quoted at the price that included VAT (the gross price), and we wanted to calculate the net price before VAT, then we would need to divide the amount by (100% + 20%) = 120% or 1.20. The gross price of £264 divided by 1.2 would thus give the net price of £220.
Now you try!
For example, a lathe is a total of £4500 including a 20% VAT. The net price of the lathe before VAT was added would be:
Now convert the following to percentages
A company sells its product for £75 per unit. How much will it sell for if the customer negotiates a 15% discount?
If a second product is sold for £75.80 including 20% value added tax, what is the net price before tax?