Profit and Loss Statement

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What is a Profit and Loss Statement?

The Profit and Loss Statement of a company indicates how its net revenues (money received from the sale of its products and services) were transformed into net income (the result after all expenses have been accounted for).

It helps investors and creditors to evaluate the past performance of the company, to predict its future performance and to assess the risk of achieving future cash flows.

Synonyms are: Income Statement and P&L.

The P&L lists the different types of revenues that the company has earned and the expenses that it incurred. Typical categories on the Income Statement are:

• Net (Operating) Revenue,

• Operating Expenses (Cost of Goods Sold, General and Administrative Expenses, and Selling Expenses),

• Non-Operating Revenues,

• Non-Operating Expenses,

• Irregular Items (Discontinued Operations, Extraordinary Items, Changes in Accounting Principles),

• Net Income, and finally:

• Earnings Per Share.

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