Profit & Loss Statements
Profit & loss is the financial report generated for the business owner to analyse their revenue, costs and expense. It is also called income statement, commonly produced for quarterly, monthly or yearly. It tells you where you are on right track of getting profit or you are struggling. Most importantly, it lets you can compare your actual expenses with budgeted cost and see how you are tracking.
There are two sections of expenses sections in the profit and loss
- Cost of goods sold
- Operating expenses
We can use financial data from profit and loss report to calculate key financial ratios such as
- Gross Profit Margin = (Gross Profit/Revenue) X100
- Net Profit Margin = (Gross Profit – Operating expenses) / Gross Profit X 100