Business, Legal & Accounting Glossary
A set of accounts, usually prepared annually, which depict a company’s trading performance and are normally read in conjunction with the balance sheet and cash flow data. Sometimes called an income statement. Part of the net profit after tax may be used to pay a dividend with the balance being retained within the business for future investment.
The profit and loss statement (or income statement, or P&L) is one of the key financial statements a company publishes. In the US, a profit and loss statement is issued each quarter, and a more detailed profit and loss statement is published each year. The profit and loss statement is like a report card on the company’s activities: it presents the net addition (ie, net income) or subtraction (ie, net loss) to retained earnings from operations over a period of time. The profit and loss statement includes intermediary calculations of income – including gross income, operating income, and pretax income – that are crucial to analyzing company operations. The profit and loss statement also presents earnings per share (EPS), which is central to calculating key valuation measures, like the P/E. The profit and loss statement has its limitations, however. First, the profit and loss statement is for a specific span of time, while a company’s activities overlap time-spans. Moreover, critics say, a profit and loss statement is an artificial accounting construction that can only partly measure a company’s success.
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This glossary post was last updated: 26th April, 2020 | 4 Views.