A profit and loss statement, also known as an income statement, is a financial statement that shows a company’s revenues and expenses over a specific period of time, such as a month, quarter, or year. The statement is used to determine a company’s profitability and to assess its financial performance.
The profit and loss statement is divided into two main sections: revenue and expenses. Revenue includes all of the money that a company earns from its sales of goods or services. Expenses include all of the costs that a company incurs in the process of generating revenue, such as cost of goods sold (COGS), selling, general, and administrative expenses (SG&A), and research and development expenses.
The profit and loss statement is calculated by subtracting a company’s expenses from its revenue. The resulting figure is the company’s net income, also known as net profit or net earnings. If a company’s expenses exceed its revenue, the company incurs a net loss.
The profit and loss statement is an important financial statement for investors and analysts, as it provides insight into a company’s financial performance and its ability to generate profits. It is also an important tool for company management, as it provides information about the company’s financial performance that can be used to make strategic decisions and to identify areas for improvement.
