Question

Florence spent a total of 26,458 dollar for her car, including the costs of financing and maintenance. Five years later she sold the car for 4500 dollar. What was her net? Was it a profit or loss?

Short answer

Answer: The net amount of Florence's car transaction is 21,958 dollars, and it is a loss.

Step-by-step solution

Identify the Total Cost and Selling Price

First, we need to identify the total cost of the car, which is 26,458 dollars. This includes financing and maintenance fees. The selling price of the car is 4500 dollars after five years.

Calculate the Net Amount

To find the net amount, subtract the selling price from the total cost: Net amount = Total cost - Selling price Net amount = 26,458 - 4500

Carry Out the Calculation

Now we'll perform the subtraction: Net amount = 26,458 - 4500 Net amount = 21,958 dollars

Determine if It's a Profit or Loss

To determine if it's a profit or loss, compare the net amount to the total cost. If it's lower than the total cost, it's a loss. If it's the same as the total cost, it's even, and if it's higher than the total cost, it's a profit. In our case, the net amount is 21,958 dollars, and the total cost is 26,458 dollars. Since 21,958 is less than 26,458, it's a loss.

Conclusion

Florence's net amount is 21,958 dollars, which is a loss compared to the total cost of 26,458 dollars.

Key concepts

Profit and Loss

Understanding profit and loss is essential for making informed financial decisions, whether it's personal finances or business transactions. When we talk about profit, we are referring to the financial gain that is achieved when the selling price of an item exceeds its original cost price. Conversely, a loss occurs when the selling price is less than the cost price.

Consider the example with Florence and her car. She initially spent \(26,458 on purchasing and maintaining the car. Over time, the value of the car depreciated, and she eventually sold it for only \)4,500. To determine whether she made a profit or a loss, we compared the selling price to the initial cost. Since the selling price was lower than the original cost, Florence incurred a financial loss. It's important to note that this concept isn't exclusive to selling items; it can apply to a variety of financial transactions, including investments and business operations.

Net Amount Calculation

Calculating the net amount is crucial when assessing the outcome of a transaction. In simple terms, the net amount represents the remaining sum after all deductions are made from the original total. This figure can help provide a clear picture of financial performance.

Deductions May Include:

• Costs related to producing or acquiring a good.
• Operational or maintenance expenses.
• Any other associated fees or taxes.

For Florence, we calculated her net amount by subtracting the selling price of her car (\(4,500) from the total cost she incurred (\)26,458). This calculation yielded a net amount of \(21,958. The net amount can either be a positive figure, indicating a profit, or a negative one, reflecting a loss. Since the net amount of \)21,958 is lower than her total cost, it indicates a loss in her case.

Subtraction of Whole Numbers

Subtracting whole numbers is a fundamental arithmetic operation, often required in financial calculations, such as determining the net amount or evaluating profit and loss. To perform subtraction, you take a larger number (minuend) and reduce it by the value of a smaller number (subtrahend), with the result being the difference.

In Florence's car scenario, we used subtraction to find the net amount. The calculation was straightforward:
Net amount = Total cost (minuend) - Selling price (subtrahend)
Net amount = \(26,458 - \)4,500
As a result, we found a net amount of $21,958. It's important to line up the numbers by their place value, subtracting each corresponding place from right to left. If necessary, we 'borrow' from the next higher place value to complete the operation. Florence’s calculation is a clear example of subtraction, showing the difference between the total costs and the selling price, reflecting a monetary loss in her case.