PROFIT—RATE PER CENT.
• ITO THE EDITOR OP THE " SPECTATOR.]
Simi,—Is there not much confusion arising owing to the general public understanding one thing by such a phrase as " 50 per
cent. profit" and the professional accountant and educated tradesman another and quite different thing ? I have only lately discovered this fact, and I find on inquiry that most people (even solicitors) were quite ignorant of it; so you may think it worth while drawing attention to the matter.
A tradesman buys some goods for £50 and sells them for £75; i.e., half as much more. What profit has he made ? Most people, I think, would answer : " Fifty per cent." The trades- man and the professional accountant say : " Not so; he has only made 331 per cent. profit." Profit, they say, is always reckoned on sale price, not on cost price. The goods sold for £75: of this £25 was profit; i.e., one-third, or 331 per cent.
A curious thing results from this system. A tradesman can never make "cent. per cent. " profit; for if lie buys, say, for £100, and sells at £1,000, only £900 of the sale price is profit; i.e., 90 per cent. I put it to a chartered accountant that this anomalous result was inconsistent with the notorious acknow- ledged profits, so much discussed, of even 1,000 per cent. in connexion with the woollen cloth trade. His reply was signifi- cant. He said : " That is only the ignorant chatter of the man . in the street; wait till you see the Report of the experts. They will not say there is even 'cent. per cent.' profit."—I am, Sir,
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