Value Investing: Profit & Loss Statement Beginners Guide

Beginners Guide To P&L Statements

A Profit & Loss (P&L) Statement summarizes a business’ income and expenses (including tax) and shows the overall net profit or loss.

P&L Statements may also be referred to as Consolidated Earnings Statements or Income Statements.

Very Simple P&L Statement Example

Business Name
P&L Statement
For Year Ended June 30, 20XX
     
Net Sales   200,000
     
Gross Profit   200,000
     
Operating Expenses    
Sales Expenses    
Sales Salaries (50,000)  
Advertising Expenses (10,000)  
Total (60,000)  
     
General & Administrative    
Office Salaries (50,000)  
Interest Expenses (10,000)  
Total (60,000)  
     
Total Operating Expenses   (120,000)
     
Earnings Before Income Tax (EBIT) 80,000
     
Income Tax   (24,000)
     
Net Profit After Tax (NPAT) 56,000

Gross Profit

How much the business made before expenses and taxes.

Operating Expenses

Includes all the money spent to run the business for the year.

Earnings Before Income Tax (EBIT)

The profit made before the business excluding taxes paid.

Net Profit After Tax (NPAT)

The profit the business made for the period after all expenses and taxes are accounted for. This figure may be labelled Net Loss After Tax if the business made a loss for the period.

Note

Business who buy goods and re-sell them will also show the cost of selling their goods. This is labelled Cost of Goods Sold (COGS). A service company that does not buy and re-sell stock will usually not show the COGS. COGS is not included in this beginners guide in order to make the explanation as simple as possible.