Q.By selling a watch for ₹2,160 a dealer gains 20%. Find the cost price of the watch.

Recover the CP by dividing the SP by the profit multiplying factor.

$\text{CP}=\dfrac{2160}{1+20/100}=\dfrac{2160}{1.2}=1800$.

A gain of $20\%$ means $\text{SP}=\text{CP}\left(1+\tfrac{20}{100}\right)=1.2\,\text{CP}$. Solving for CP:

Check (independent verification): $20\%$ of $1800=\dfrac{20}{100}\times1800=360$, and $1800+360=2160$, which is the given selling price.

Unitary method: if CP is $100\%$, then SP is $120\%$ and corresponds to $₹2160$; so $1\%$ is $\tfrac{2160}{120}=18$ and CP $=100\times18=₹1800$.

Taking $20\%$ of the selling price and subtracting ($2160-432=1728$). The profit% is on the CP, so you must divide by $1.2$, not subtract $20\%$ of the SP.