Discounts

Definition

Discounts are reductions in the original price of an item or service. They are often used to attract customers and boost sales.

5 Must Know Facts For Your Next Test

1. A discount can be expressed as a percentage or a fixed amount.
2. The formula for calculating the sale price after a discount is Sale Price = Original Price - (Original Price * Discount Percentage).
3. Seasonal sales, clearance events, and promotional offers are common scenarios where discounts are applied.
4. Understanding how to calculate discounts is essential for budgeting and financial planning.
5. Discounts can affect the overall revenue and profit margins of businesses.

Review Questions

• How do you calculate the sale price if an item originally costs $50 and has a 20% discount?
• What is the impact of offering frequent discounts on a business's profit margin?
• Can you list three common scenarios in which discounts are typically offered?

Related terms

Markups: Markups refer to the amount added to the cost price of goods to cover overhead and profit.

Sales Tax: Sales tax is a percentage of the sale price imposed by the government on the sale of goods and services.

Net Price: Net price is the final price paid after all discounts, taxes, and additional charges have been applied.