What is a Profit & Loss Statement?
This statement summarizes a company's financial performance and reveals whether it made a profit or suffered a loss during a specific time period.
By understanding what this statement reveals, you'll gain a clearer picture of how a company is faring financially. So, let's dive in and discover what the Profit & Loss Statement shows!
πΈ Revenue: Money In, Money In
The first thing we look at is revenue! It highlights the total amount of money generated from the sale of goods or services during a specific period. By analyzing revenue trends, stakeholders can assess the growth or decline in a company's sales and evaluate the effectiveness of its sales strategies.
π²Cost of Sales (COGS): Expenses to Make Products
This represents the direct expenses incurred in producing or acquiring the goods sold by the company. By subtracting the COGS from the revenue, stakeholders can determine the gross profit margin. This metric provides valuable insights into a company's ability to control production costs and generate profits from its core operations.
πΌ Operating Expenses: Keeping the Business Running
These include salaries, rent, utilities, marketing expenses, and administrative costs. The Profit & Loss Statement details these expenses, allowing stakeholders to evaluate the efficiency of a company's operations. By monitoring operating expenses, businesses can identify areas for potential cost-cutting measures or reallocation of resources.
π Non-Operating Income and Expenses: Extra Gains or Losses
Non-operating income and expenses refer to financial transactions that are not directly associated with a company's primary business operations. These can include gains or losses from the sale of assets, interest income or expenses, and investment gains.
π° Taxes and Net Income: What's Left?
Companies are required to pay taxes on their profits. By subtracting taxes and all expenses from the revenue, we arrive at the net income. Net income represents the final profit & loss a company has made. It's like the bottom line that tells us how much money the company has ultimately earned after accounting for all costs and taxes.
π EBITDA
On Modeliks, the Profit & Loss statement shows EBITDA information - which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, is a financial measure used to understand a company's profitability. It gives a clear picture of how well a company is performing in its core operations.
Within the reports section, you have the flexibility to view the preferred statement in two formats:
- Monthly (first year)
- Annual
Additionally, you can utilize the available charts to visually represent the data, aiding in better understanding and comparison of the statement's components over time.
Overall, the profit and loss statement provides a comprehensive overview of a company's financial performance, revealing its revenue, expenses, profitability, and net profit.
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