GMAT Percentages: Complete Guide (with Examples)

Published on 2025-06-09 • 10 min read

Quick Takeaways

Multiplier Method: 20% increase = 1.2x (faster than adding).
Successive %: Never add them! (10% off then 20% off ≠ 30% off).
Translation: 'Of' means multiply; 'Is' means equals.
Interest: Compound = Successive % change (use multipliers).
Trap: % 'of' vs % 'greater than' (150% of x ≠ 150% more than x).

Percentages: The Language of Business

There's a reason the GMAT is obsessed with percentages: they are the language of business. Profit margins, market share, interest rates, and growth are all expressed in percentages. Mastering this topic is not just about getting a good GMAT score; it's about building a foundational skill for your future career. The GMAT tests this concept in a variety of ways, from straightforward calculations to complex, multi-step word problems.

Percent Increase & Decrease: The Core Concept

This is the most fundamental percentage skill. The key to any percent change problem is to correctly identify the 'original' or 'base' value. The formula is always:

Percent Change = (Difference / Original Value) × 100

For a Percent Increase: (New Value - Original Value) / Original Value × 100.
For a Percent Decrease: (Original Value - New Value) / Original Value × 100.

The Multiplier Shortcut

A faster way to calculate percent change is by using multipliers. Instead of calculating the change and then adding or subtracting, you can do it in one step. A 30% increase is equivalent to multiplying by 1.30, and a 20% decrease is equivalent to multiplying by 0.80. This shortcut is especially powerful for successive percent changes.

Successive Percents: The Compounding Effect

A very common GMAT question involves multiple percentage changes applied in sequence (e.g., a 20% discount followed by a 10% discount). The number one mistake is to simply add the percentages together (e.g., 20% + 10% = 30% discount). This is incorrect. You must calculate the changes sequentially, as the base value changes after the first percent is applied.

The Smart Way: Use multipliers. A 20% discount (multiplier of 0.80) followed by a 10% discount (multiplier of 0.90) results in a final price of Original Price × 0.80 × 0.90 = Original Price × 0.72. This is a final price that is 72% of the original, which means the total discount is 28%, not 30%.

Simple vs. Compound Interest: A GMAT Favorite

Interest problems are a classic application of percentages. You must know the difference between simple and compound interest.

Simple Interest: Interest is calculated only on the original principal amount. The formula is I = P × R × T, where P is principal, R is the annual rate, and T is time in years.
Compound Interest: Interest is calculated on the principal and on any previously earned interest. This is a form of successive percentage change. The formula is A = P(1 + r/n)^(nt), where A is the final amount, n is the number of times interest is compounded per year, and t is the number of years.

Common Percentage Traps to Avoid

The 'Of vs. More Than' Trap: Read the wording carefully. '150% of x' is 1.5x. '150% more than x' is x + 1.5x = 2.5x. This is a subtle but crucial difference.
The Wrong Base Trap: Always ask yourself, 'percent of what?' The 'what' is your base (the denominator). If an item's price increases from $80 to $100, the increase is $20. The percentage increase is 20/80 = 25%. If you mistakenly use $100 as the base, you'll get the wrong answer.
Adding and Subtracting Percents: As mentioned, you cannot add or subtract successive percentages. You must apply them sequentially.