finance
P&L (Profit & Loss Statement)
The income statement: revenue minus expenses, ending with net profit.
Definition
The Profit & Loss statement (also called Income Statement) summarizes revenue, costs, and profit over a period (month, quarter, year). Standard structure: Revenue, minus COGS = Gross Profit, minus Operating Expenses = Operating Profit (EBIT), minus Interest and Tax = Net Profit. Reading a P&L is the most basic financial literacy skill for any operator. Most founders only look at revenue and net profit and skip the middle lines, missing where the leverage actually lives (gross margin, operating margin).
In your business
- →Read the P&L line by line monthly, not just the bottom number
- →Track expense categories as % of revenue - they should stay stable or shrink as you grow
- →Compare to last quarter and same quarter last year, not just to budget