A P&L report, or profit and loss report, is a financial statement that summarizes a company’s revenues, costs, and expenses over a given period of time. It is also known as an income statement or statement of operations. The P&L report provides insight into a company’s financial performance, showing whether it made a profit or incurred a loss during the period.

The P&L report is typically prepared on a monthly, quarterly, or annual basis. It starts with the company’s revenues, which include all the money earned from sales or services rendered during the period. Next, the report deducts the cost of goods sold, which is the direct cost of producing the goods or providing the services sold. The difference between the revenues and the cost of goods sold is known as the gross profit.

After calculating the gross profit, the P&L report deducts the operating expenses incurred during the period, including rent, utilities, salaries, and other overhead costs. The difference between the gross profit and the operating expenses is known as the operating profit. This figure shows how much profit the company earned from its core operations before taking into account interest and taxes.

Finally, the P&L report deducts any interest or taxes paid during the period to arrive at the net profit or loss for the period. If the net profit is positive, it means the company made a profit during the period. If the net profit is negative, it means the company incurred a loss during the period.

The P&L report is an important tool for business owners and investors to assess a company’s financial health. By analyzing the report, they can determine whether the company is generating enough revenue to cover its expenses, whether it is profitable, and whether it has the potential for future growth.

In addition to its use by business owners and investors, the P&L report is also used by lenders and creditors to evaluate a company’s creditworthiness. Lenders use the report to determine whether a company is eligible for a loan or line of credit, while creditors use it to decide whether to extend payment terms to the company.

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