Percentages are all around us, on everything from food packaging to restaurant bills. But a lot of people go weak at the knees when asked to work one out.

Big deal, you might say, you can get through life without needing to know how to use a percentage.

That's probably true, but if you don't understand percentages you are at a huge disadvantage compared to someone who does. In fact, you open yourself to being ripped off at every turn.

To make sure that you are one of those in the know, here is Times Money's guide to working out percentages.

What is a percentage?

It is a way of expressing a number as a fraction of 100 - per cent means per hundred.

So 25 per cent is 25 parts of 100, 50 per cent is 50 parts of 100. One hundred per cent is 100 parts of 100, in other words, the whole amount.

Why are they useful?

It makes it easy to compare things. For example, suppose you scored 43 out of 89 in one test and 24 out of 40 in another. If you can't work out percentages would you know in which of these tests you did best?

How to work out a percentage

When confronted with two numbers you divide the smaller number by the bigger one and then you multiply by 100.

So if you scored 43 out of 89 in a test you divide 43 (the smaller number) by 89 (the bigger number), which equals 0.48. You then multiply 0.48 by 100 = 48 per cent.

If you scored 24 out of 40 you divide 24 by 40 = 0.6. Multipled by 100 that comes to 60 per cent.

So, there is your answer.

How do I work out percentage parts?

Problem: Imagine you are in a restaurant. The bill comes to £80 and you want to leave a 10 per cent tip. How much would that be?

The decimal method

You turn the percentage into a decimal, by dividing the percentage by 100: 50 per cent becomes 0.5; 60 per cent 0.6; 20 per cent 0.2.

You then multiply by the decimal to get the answer.

Using the above example, 10 per cent becomes 0.1, and so 10 per cent of £80 is

£80 x 0.1 = £8

If you wanted to leave a 12 per cent tip you multiply by 0.12

£80 x 0.12 = £9.60.

The fraction method

This involves turning the percentage into a fraction.

So you would turn 10 per cent into a fraction: 10 per cent = 1/10.

10 per cent of £80 is 1/10th of £80 which is

£80 ÷ 10 = £8.

You can save a lot of time by learning a few simple rules:

10 per cent is 1/10 so you divide by 10

20 per cent is 1/5 so you divide by 5

25 per cent is 1/4 so you divide by 4

50 per cent is 1/2 so you divide by 2

How do I work out a percentage increase?

Problem: You are earning £30,000 a year when you get a letter from your boss telling you that your salary will go up 3 per cent next month. What does that mean?

The first thing you need to do is find 3 per cent of £30,000, so you turn the percentage into a decimal, 0.03.

Then multiply £30,000 by 0.03 = £900.

Add the £900 to your salary now - £30,000 - which means that from next month you will be earning £30,900.

Quick method

There is an even quicker method. If your £30,000 salary is increasing by 3 per cent then you need to work out what 103 per cent of £30,000 is.

103 per cent as a decimal is 1.03 so:

1.03 x 30,000 = £30,900.

What about a percentage decrease?

Problem: You've got your eye on a new bed originally priced at £1,500. There is a sale on and the price tag tells you that there is 10 per cent off.

Using the fraction method (see above), divide £1,500 by 10 to find the 10 per cent decrease

£1,500 divided by 10 equals £150

That means the sale price is £1,500 minus £150 = £1,350

Alternative method

A 10 per cent decrease is equivalent to 100 minus 10 = 90 per cent of the original price.

90 per cent as a decimal is 0.9, so

0.9 x £1,500 = £1,350.

40 per cent off £1,500 is equivent to 100 minus 40 = 60 per cent.

60 per cent as a decimal is 0.6, so

0.6 x £1,500 = £900.

Is there a difference between percent and percentage point?

A percentage point is the difference between two percentages. For example, if your mortgage rate is 4 per cent and rises to 5 per cent, you would say that the rate rose by one percentage point.

It would be wrong to say that your rate rose by one per cent because one percent of four is 0.04, and so a 1 per cent increase on 4 per cent would take you to 4.04 per cent.

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