# How to Calculate a Trade Discount

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A trade discount is similar to a sales discount in that the purchaser can buy a product for less than the list price of the product. Companies usually give trade discounts to other companies that buy often or buy large amounts of products. Normally, a trade discount is presented as a percentage off of the list price. For example, a trade discount would be 10 percent off the list price.

Determine the list price of the object. For example, Company A is selling widgets for \$500,000.

Determine the trade discount percentage. For example, Company B wants to buy the \$500,000 widgets and has always been a good customer to Company A so Company A offers a trade discount of 10 percent to Company B.

Multiply the price by the trade discount percentage to determine the amount of the trade discount. In our example, 10 percent of \$500,000 equals a trade discount of \$50,000.

Subtract the trade discount from the selling price to determine the selling price net any trade discounts. In our example, \$500,000 minus \$50,000 equals a net selling price of \$450,000.

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