A profit and loss (P&L) statement, also known as an income statement, is a financial document that shows a company's revenues, expenses, and profits over a specific period of time, such as a month or a year. The P&L statement is used to measure a company's financial performance and to assess whether it is generating a profit or incurring a loss.
The P&L statement typically includes the following elements:
Revenues: This is the total amount of money that a company has earned from the sale of goods or services during the period covered by the P&L statement.
Costs of goods sold (COGS): This is the total cost of the goods or services that a company has sold during the period covered by the P&L statement. It includes the direct costs of producing the goods or providing the services, such as materials, labor, and manufacturing overhead.
Gross profit: This is the difference between revenues and COGS. It represents the profit that a company has made from the sale of its goods or services before accounting for other expenses.
Operating expenses: These are the expenses that a company incurs in the course of running its business, such as rent, salaries, and marketing.
Net income: This is the profit or loss that a company has made after accounting for all revenues and expenses. It is calculated by subtracting operating expenses and COGS from revenues.
The P&L statement is an important financial document that helps a company to understand its financial performance and identify areas where it may need to make changes in order to improve profitability. It is often used by investors, lenders, and other stakeholders to assess the financial health of a company.