Wednesday, June 18, 2008

What is a P&L or The Profit and Loss Statement?

It adds all the revenues of the business and subtracts all the operating expenses, thereby providing you with a figure representing a profit or a loss. The P&L measures the results of operations of a business over a given period of time, usually a month, quarter, or a year. The P&L is also known as Income Statement.

The income statement is the one of the three major financial statements. The other two are the balance sheet and the statement of cash flow. The income statement is divided into two parts: the operating and non-operating sections. The section of the income statement that deals with operating items is interesting to investors and analysts because it discloses information about revenues and expenses that are a direct result of the regular business operations.

The non-operating items section discloses revenue and expense information about activities that are not tied directly to a company's regular operations.

Here is a sample of an Income Statement or Profit and Loss:

Profit and Loss Statement
December 31, 200x
Sales (revenues)
- Cost of goods sold
= Gross margin
Wages and salaries
Selling expenses
Total expenses
Net income (pretax)