Profit and loss statements, or P&L statements, explain your business's financial performance. This video explains what a P&L is and how it's structured. This includes explanations of major items on a P&L statement, including revenues, volume, price, discounts, direct costs, gross profit, indirect costs, SG&A, operating profit (EBITDA), interest, taxes, depreciation, amortization, and net profit.
- One of the most common terms you'll hear people…using around the office is P&L.…That stands for Profit and Loss Statement.…It's a financial statement that tells you…how much money you're making or losing.…It's a standard accounting approach…for looking at the financial performance…of your organization.…It has some very common elements to it.…At the top of your P&L, you should see your revenues,…and that may be broken down in terms of…the volume of product or service you're delivering,…the price you're offering it at,…and any discounts you've given.…
That's referred to as the top line.…Next, you'll see your costs, your direct costs.…These will be cost of goods sold.…You may see it reflected as COGS, C-O-G-S.…That's the cost of all the inputs…that go into delivering your product or service.…The line below that is typically gross profit.…This is just the profit of,…I sold one unit of product, I had this much expense,…and I made this much money on that unit of product.…
Below gross profit you get into operating expenses,…
- What business are you in?
- What's your market and who is your competition?
- What problem does your business solve?
- How are your products and services created? What are your pricing and growth strategies?
- How do you measure performance?
With the answers in hand, you can be assured your have the knowledge to make the best decisions for your business.