What is a Profit & Loss Statement?

//What is a Profit & Loss Statement?
What is a Profit & Loss Statement? 2017-10-09T07:29:00+00:00

Definition: A profit & loss statement, also called an income statement, is a financial statement that reports a company’s revenues and expenses for a given period of time. In other words, the statement shows the profitable of a company for a time period.

What Does profit & loss Statement Mean?

What is the definition of profit and loss statement? The P&L Statement, also called the Income Statement is one of the three main financial statements, along with the Balance Sheet and the Cash Flow Statement. Broadly speaking, the P&L shows all the company’s income and expenses, but these are often divided in four main sections: revenues, cost of goods or services sold, operating expenses and financial expenses.

Each of these sections will contain many different categories but they can be summarized as the previous to have an overview of the company’s current profitability. The P&L allows the analyst the opportunity to view the company’s profitability on different levels. Many ratios are employed to analyze a P&L, to assess how good the company’s results actually are.

Here’s an example.

Example

Atlantic Suppliers LLC is a company that provides scuba diving services to tourists in the state of California. The company’s fiscal year ends on December 31 and the Chief Executive Officer wants the report on last year’s results to show them to potential investors. The company has some expansion projects this year and the CEO wants to analyze how profitable the company was before addressing this group of investors. Will the Profit and Loss Statement provide all these information?

According to our previous definition, the P&L statement is a report that reflects the company’s results for a given period of time. This means that, in order to understand how profitable the company was, the accounting department must produce last year’s P&L statement for the CEO, so he can show it to potential investors to persuade them about investing in the company’s new ventures.

Summary Definition

Define profit & loss Statement: P&L means an income statement reporting a company’s income and expenses for a period.