We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Profit and Loss Statement?

By Matt Brady
Updated: May 17, 2024
Views: 12,649
Share

A profit and loss statement, also called an income statement, is a financial record detailing a company's net profit—the bottom line—and expenses over an earning period. Typically these statements are issued quarterly or once every fiscal year, and are commonly abbreviated and even spoken of as P&L statements. A profit and loss statement isn't only used to help the owner of a company run a tight financial ship, it can also be an essential tool for investors to gain an idea of how well a company is able to minimize its expenses and maximize its profits. If a company has a profit and loss statement that bodes well for future earnings, investors may find good reason to jump aboard.

Either for investment or for bookkeeping purposes, profit and loss statements are generally viewed alongside cash flow statements and balance sheets. Investors trying to assess a company's worth typically look at all three reports because each one sheds light differently on how well a company earns and manages money. Profit and loss statements detail costs and expenses alongside earnings. Balance sheets can show how well a company is able to balance its assets versus its liabilities. Cash flow statements show where the general influx of money is being spent.

Each report can be considered a piece of a company's financial puzzle. Viewed by themselves, however, it may be difficult to get a clear look at the big picture. For example, a profit and loss statement could show strong earnings, but the cash flow statement and balance sheet reveal that those earnings are primarily being sucked into debt. Thus a company that appears profitable on its profit and loss statement may not necessarily equal a wise investment. Conversely, a company may not be making attractive profits according to the profit and loss statement, but the balance sheet and cash flow statement reflect a wise use of money that may set up the company for strong earnings in the future.

Profit and loss statements reflect data recorded over a period of time. This is different than the balance sheet, which provides its data at any given point in time. Like the balance sheet, cash flow statements tend to measure specific periods in time. This is another reason why it's important to assess all documents against one another. The profit and loss statement allows an investor or bookkeeper to see how much money was brought in over a period of time, while balance sheets and cash flow statements help provide an idea of where that cash is flowing at any given point in time.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Editors' Picks

Discussion Comments
Share
https://www.wisegeek.net/what-is-a-profit-and-loss-statement.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.