A company's profit was 20% of its sales. The next year its sales rose by 20% but its profit fell to 15% of sales. How did the company's profit change?

It fell by 10%Correct answerYour answerIt fell by 5%Correct answerYour answerIt fell by 25%Correct answerYour answerIt rose by 15%Correct answerYour answer

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CorrectNot quiteAnswer A

Correct answer: A

Let old sales = 100; old profit = 20.
New sales = 120; new profit = $15\% \text{ of } 120 = 18$ .
Change = $\frac{18 - 20}{20} \times 100 = -10\%$ , a fall of 10%.

Worth noting

The margin fell by 5 percentage points (a 25% fall in the margin), but sales grew, so profit in rupees fell only 10%.

Concept: Combining a change in rate with a change in base
Typical timeTypical: 110 s
Your timeYours: —

The rule this testsPercentage change

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A company's profit was 20% of its sales. The next year its sales rose by 20% but its profit fell to 15% of sales. How did the company's profit change?

Explanation