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Many people are not aware of this when they start a business: Being an entrepreneur also has a great deal to do with arithmetic! Calculating prices and discounts, calculating margins, calculating taxes – actually, as an entrepreneur you are constantly busy calculating..
Therefore, here in the Entrepreneur’s Handbook there is a small basic course "commercial arithmetic" from the beginning, because not every entrepreneur was in the mathematics advanced course
Today we are talking about Percentage calculation!
What is percentage calculation?
The percentage calculation serves above all to put different sizes in the relationship to each other and to make so comparable.
For this purpose, the quantities to be compared are set in relation to a uniform basic value (hundred) and this is where the name "percent" comes from: from the Italian "per cento", d.h. "out of one hundred".
As a basis one must imagine that always the percentage value is set in relation to the basic value, resp. the percentage of 100.
Basic Formula: Percentage value / basic value = Percentage / 100
or differently represented:
The percentage value
The percentage value indicates the quantity, which is calculated proportionally from a total quantity. So he answers the question how much exactly is X % of a basic quantity.
formula: Percentage value = (basic value x percentage) / 100
or presented in a different way:
- Base value = 34 (children)
- Percentage = 50 (%)
- Result: 34 x 50 /100 = 17 children of one class will therefore go back to school on Monday.
Not so difficult, or?
The percentage indicates the percentage share that the quantity to be considered has in the total volume. One uses it z.B., to compare different proportions of different basic quantities.
Formula: Percentage = (percentage x 100) / basic value
or differently represented:
- In class A there are 12 students coming back to class on Monday.
- In class B there are 18 students who are supposed to come on Monday.
- Question: do these values match the allowed 50%??
- Class A: 32 students
- Class B: 35 pupils
- Class A: 12 x 100 / 32 = 37,5 %
- Class B: 18 x 100 / 35 = 51.43 %
This means that a student from class B must either go to class A on Monday or stay at home.
The basic value
The basic value can be calculated from the percentage value and the percentage rate.
Formula: Basic value = (percentage value x 100) / percentage
or presented in a different way:
- As of Monday, 50% of the children will be allowed to go back to school.
- At school A there are 123 children.
- Question: how many children go to school altogether A?
- 123 x 100 / 50 = 246 children go to school in total A
Maybe there are 247 children, but since you can not divide children, we come purely mathematically to 246
The whole percentage calculation is based on Rule of three. If you want to have a closer look, just follow this link:
Application of the percentage calculation in the enterprise
The percentage calculation is actually needed all the time in everyday business life. Here are a few examples:
The sales tax is probably the best known case where the percentage calculation is applied. Here the sales tax rate is expressed as a percentage of the net amount.
Basic formula: Gross amount = net amount + sales tax amount
Unfortunately, this is also where most mistakes happen, if z.B. from a gross amount the net amount is to be calculated.
- One pair of trousers costs net 35,20 EUR.
- For pants the sales tax rate is 19%.
- QuestionWhat is the gross price of these pants??
The basic value is 35,20 (EUR) and the percentage is 19 (%). Now we have to calculate the percentage value and then add it to the basic value, because the gross value is calculated from the net value plus the tax rate. Sales tax value.
The amount of sales tax is calculated as follows: 35,20 x 19 / 100 = 6,69 EUR, therefore the trousers cost gross 35,20 + 6,69 = 41,89 EUR.
- A blouse costs gross 69,99 EUR.
- For blouses, the sales tax rate is also 19%.
- Question: What is the net cost of this blouse? And how big is the included sales tax amount?
Unfortunately, many people make the mistake of deducting 19 % from the gross value and forget that the gross value is not 100 % 119 % (s. Basic formula)!
- percentage = 119 (%)
- Percentage value = 69,99 (EUR)
Result: the basic value (i.e. the net amount) is = 69,99 x 100 / 119 = 58,82 (EUR). If you subtract this from the gross amount, the included sales tax = 69,99 – 58,82 = 11,17 (EUR).
To be on the safe side we calculate again: 58,82 x 19 / 100 = 11,18 EUR. Oops, where does the 1 ct come from?. Difference? It’s simple, it’s a rounding difference that can always happen. Not bad.
If you want to know more about sales tax, read on here:
Income& Business tax
With taxes it is actually always about percentages. Tax rates, tax rates – all percentages of a basic value, which the tax office wants from us.
For more information read on here:
Also, I think everyone is familiar with the topic of discount promotions, or? 70% on winter goods, 30% on all goods without cables and so on ..
Customers are used to such marketing actions and the higher the percentage, the more favorable the offer appears to be.
It is only important that the entrepreneur does not miscalculate and end up paying more
This also leads us directly to the topic of percentage calculation in price calculation.
Normally (roughly speaking) one takes the purchase price or the net value. the cost of goods sold, adds a certain percentage of general overhead (such as.B. (e.g. rent, administration, etc.) and of course a profit margin (also in percent) and thus determines the sales price.
With the target cost calculation it goes the other way round: starting from a desired sales price, one determines backwards the maximum manufacturing or sales costs. Purchase costs, but also here the percentage calculation is used everywhere.
More about target costing can be found here:
If you want to run a business successfully, you should know exactly how to do it. This requires a whole series of analyses, which should be done every now and then.
- Market analyses
- Profit analyses
- Stock analyses
Everyone uses the percentage calculation at one point or another. Be it to look how much of the assets are spontaneously available, if there are unhealthy dependencies from customers or suppliers, how the market is developing and how you stand in it and of course, if you earn enough with your business to survive in the long run.
So, enough math for today, the math lesson for commercial arithmetic will continue some other time
You can find more information in the category "Finances" or just have a look at the other parts of our mathematics course for entrepreneurs: