What is it?

The P&L, or Profit and Loss statement, is a financial report that summarizes a company's revenues, costs, and expenses over a specific period, typically a quarter or year. Its primary purpose is to show the company’s ability to generate profit by increasing revenue, reducing costs, or both.

Key components of a P&L statement include:

1. Revenue: the total income generated from sale of goods or services before any expenses are deducted.
2. Cost of goods sold (COGS): direct costs related to the production of goods or services sold, such as raw materials and labor.
3. Gross profit: the difference between revenue and COGS, showing how efficiently the company produces its goods or services.
4. Operating expenses: costs associated with running the business that are not directly tied to production, such as marketing, rent, and salaries.
5. Operating income (EBIT): earnings before interest and taxes, calculated as gross profit minus operating expenses.
6. Other income and expenses: non-operating income or expenses, like interest or gains/losses from investments.
7. Net income: the final profit or loss, calculated by subtracting taxes and interest from operating income. This is the company’s bottom line.

What does it tell me about my company?

The Profit and Loss (P&L) statement provides a clear picture of your company’s financial health over a specific period. Here's what it shows:

1. Revenue and growth: the P&L tracks income from core activities (sales of products or services). It helps you monitor revenue trends, offering insight into whether your business is growing, stable, or declining.
2. Profitability: by comparing revenues with expenses, the P&L indicates whether your company is profitable or facing a loss. It highlights gross profit, operating income, and net income, allowing you to assess how well your business manages costs and generates profit.
3. Cost management: the P&L details costs of goods sold (COGS) and operating expenses, helping you spot areas where costs are high or rising. This can reveal inefficiencies, such as excessive overhead or production costs, that may need addressing.
4. Operating efficiency: it shows key profitability ratios like gross profit margin (gross profit as a percentage of revenue) and operating profit margin (operating income as a percentage of revenue), offering insights into how effectively your company manages operations.
5. Cash flow impact: although the P&L doesn't directly show cash flow, the relationship between revenues and expenses can signal whether your business is generating cash or running through it. A positive or negative net income is a good indicator of cash flow trends.

What are the underlying data sources?

The P&L is based on your BWA, balance sheet, and annual report.