This post is the 2nd post as a part of the weekly theme 'Finance'. Today, I will write about P&L, P/L, or PL , short hand for Profit and Loss, or also called income statement
PL is one of the key financial statements that companies have to publicize it quarterly and annually. As the name indicates, PL is about profit how much money a company earns by its commercial activies and loss how much money the comapny spend as expenses.
In PL, there are TWO major elements first we need to understand:
- Revenue how much money the company received from customers
- Cost including cost of goods sold (COGS), oeprating expenses, tax, and interest
Second, what we need to care is the profit which is calucated by subtraction of cost from revenue.
Now let's find an analogy in our daily life. If we are a salaried worker, you are selling your hours to the employing company and earned your wage. Here is a hypothetical profit and loss in a month:
- earn $1000
- pay $100 for tax, $200 for food, $200$ for a rent.
In this case, your revenue is $1000 and your cost to generate your revenue is $500. So the profit is $500.