PROFIT AND LOSS STATEMENT (P&L)
Back to GlossaryDefinition
A financial statement that summarizes revenues, costs, and expenses in a given time period.
Summary
A Profit and Loss Statement (P&L), also called an Income Statement, is like a financial report card that shows whether a business made or lost money over a specific period (like a month, quarter, or year). It starts with all the money coming in (revenues), then subtracts all the money going out (costs and expenses), to show the bottom line - whether the company is profitable. Think of it as a summary of a business's financial performance that answers the key question: 'Are we making money?'
Usage Context
Essential for understanding business performance analysis, investment decisions, financial planning, and evaluating management effectiveness. Critical when studying financial analysis, business valuation, and corporate finance topics.
Common Confusions
- Confusing revenue with profit - revenue is total sales, profit is what's left after expenses
- Thinking P&L shows cash in the bank - it shows profitability, not cash position
- Mixing up P&L with balance sheet - P&L shows performance over time, balance sheet shows position at a point in time
- Assuming all expenses are the same - not distinguishing between operating and non-operating expenses
