Bob Greifeld, the chief executive of the Nasdaq stock market, admitted under oath that he did not understand how to calculate gross profit margin, one of the most rudimentary formulas in business accounting.

The admission is humiliating for Mr Greifefld, an MBA graduate who is in the thick of a hostile bid to take over the London Stock Exchange, one of the most significant moves of his career.

Mr Greifeld’s lack of basic accounting knowledge was exposed this year during a case in the New Jersey Superior Court. The Nasdaq chief filed a lawsuit against a company called Tours of Enchantment, which had organised a $600,000-plus reunion for his family at a luxurious castle in Ireland.

Tours of Enchantment, run by the Houston entrepreneur Gregory Patrick, claimed that it charged a fee based on cost plus a gross profit margin of 38 per cent.

Mr Greifeld, meanwhile, claimed in his lawsuit that he understood the contract to be based on cost plus a mark-up of 38 per cent. If an item that costs $100 is marked up by 38 per cent, it becomes $138 on an invoice. If the same item is required to show a 38 per cent profit margin, it becomes $162, because gross profit margin is calculated by dividing profit by the selling price of an item.

In an embarrassing courtroom exchange, Richard Mackiewicz, a lawyer acting for Mr Patrick said: “Mr Greifeld, do you understand the difference between a 38 per cent mark-up and a 38 per cent gross profit margin?” “No,” Mr Greifeld replied. The judge in the case ordered that Mr Patrick return masters of a DVD of the family holiday made for Mr Greifeld but threw out all other claims. Mr Patrick, who is to appeal against the decision on Tuesday, claims that he is still owed $70,000 by Mr Greifeld.

Steven Cohen, the lawyer representing Mr Greifeld in the case, declined to comment, and Nasdaq declined to return calls seeking comment.

Mike Warburton, a UK partner at Grant Thornton, said that Mr Greifeld’s lack of knowledge was inexcusable.

“If anyone in business does not know what profit they are making, they shouldn’t be in business at all,” he said. “I know accountants will sometimes try to overcomplicate the equation but, believe me, it really is . . . simple.”

The transcript

Richard Mackiewicz, lawyer to the defendant “Mr Greifeld, do you under- stand the difference between a 38 per cent mark-up and a 38 per cent gross profit margin?”

Bob Greifeld, Nasdaq CEO “No.”

RM “You do not?”

BG [shakes head]

RM “Would I be correct that you do not know how to compute gross profit margin?”

BG “How to compute gross profit margin?”

RM “Yes.”

BG “Under US GAAP?”

RM “Just do you know how to compute . . .”

BG “No. [long pause] Under US GAAP. [long pause] I have accountants who do that for me.”

Edited extract of court transcript in case of Robert Greifeld (plaintiff) against Retention Resources d/b/a Tours of Enchantment (defendant) and third-party plaintiff Jack Andersen