What is a profit and loss statement?
The income statement (P&L) is a financial statement that summarizes the income, expenses, and expenses incurred during a specified period, usually a quarter or fiscal year. Profit and Loss: These records provide information about the company’s ability or not to generate profit by increasing revenue, reducing costs, or both. or income statement, profit and loss statement, or expense statement.
Profit and loss management refers to the way a company manages its income statement through revenue and cost management.
important issues
- The income statement is a financial statement that summarizes the income, costs, and expenses incurred over a specified period.
- The income statement is one third of the financial statements every public company releases quarterly and annually, along with the balance sheet and cash flow statement.
- It is important to compare income statements from different accounting periods because changes in revenue, operating costs, research and development expenses, and net profit over time are significant. means more than numbers
- When combined with the balance sheet and cash flow statement, the income statement provides insight into a company’s financial performance.
Understanding the Income Statement (P&L)
The P&L statement is one of the three financial statements every public company issues quarterly and yearly, along with a balance sheet and cash flow statement.It is often the most popular and popular financial statement in a business plan because it shows. Quickly see whether the profit or loss was generated by the business.
The income statement, like the cash flow statement, shows the changes in accounts over a period of time, whereas the balance sheet as a whole shows how much a company owns and owes over a single period. This is because under the accrual accounting method, companies can record revenue and expenses before cash changes hands.
The income statement follows a general format as seen in the example below: it begins with an item for revenue called the top line and subtracts the cost of doing business, including the cost of goods sold, overhead. Operations Expenses Taxes and Interest The Difference Also Known As Profit Is Net Profit Also Known As Profit Or Profit You can find many templates for creating a personal or business statement online for free.
It’s important to compare income statements from different accounting periods because changes in revenue, operating expenses, research and development, and net profit over time are more significant than numbers. The company may increase, but expenses may increase at a faster rate.
Sample Income Statement (P&L)
Below is Caterpillar Inc’s earnings or income statement for 2013 and 2014 (all figures are in US dollars except per-share data):
| twelve months ending December 31 | 2014 | 2013 | ||
| Sales and Revenue: | ||||
| Energy and transportation machinery sales | 52142 | 52694 | ||
| Income of financial products 3,042 | 2962 | |||
| Sales and total revenue | 55184 | 55656 | ||
| Operating costs: | ||||
| Cost of Goods Sold | 39767 | 40727 | ||
| Sales, general and administrative expenses | 5697 | 5547 | ||
| R&D cost | 2,135 | 2,046 | ||
| Interest payment of financial products | 624 | 727 | ||
| Operating Expenses (Income)Other | 1,633 | 981 | ||
| Total operating costs | 49856 | 50028 | ||
| Operating Profit | 5328 | 5,628 | ||
| Interest expenses exclude financial products | 484 | 465 | ||
| other income (cost) | 239 | (35) | ||
| Total profit before tax | 5083 | 5,128 | ||
| Provision (benefit) for income tax | 1,380 | 1,319 | ||
| Total Company Profit | 3703 | 3809 | ||
| An interest in the profit (loss) of a subsidiary company | 8 | (6) | ||
| Profit of the consolidated company and its affiliates | 3,711 | 3803 | ||
| Less: profit (loss) attributable to non-controlling interests | 16 | 14 | ||
| Profit [Footnote 1: Profit attributable to common shareholders] | 3,695 | 3,789 | ||
| earnings per common stock | 5.99 | 5.87 | ||
| Earnings per common share – diluted [Footnote 2: Diluted by exercise of share-based compensation awards using share repurchase method] | 5.88 | 5.75 | ||
| Weighted average number of common shares (million) | ||||
| – Basic | 617.2 | 645.2 | ||
| – Dilute [See footnote 2] | 628.9 | 658.6 | ||
| Cash dividends announced per common share | 2.70 | 2.32 |
One can use the income statement to calculate several metrics, including gross profit margin, operating profit margin, net profit margin, and operating ratios, and when combined with the balance sheet and cash flow statement, the income statement provides information. An in-depth look at the company’s financial results.
Article Source – Investopedia.com