Demystifying

Profit & Loss Statement

October 30, 2014

WEBINAR

Where do you stand today in terms of understanding

the P&L statement?

Agenda

The 3 key financial statements

Profit and Loss Statement

Structure and key components

How does it help you in business decisions

What you should be asking?

Learning by Doing – Finance 360 Degrees

Q & A

3 Key Financial Statements

Balance Sheet

Cash Flow Statement

Profit & Loss Statement

Profit & Loss Statement

A statement of income and expenses around the

operations of the company

For a particular PERIOD of time

You sell your goods or services – INCOME

You make expenses to run operations – EXPENSES

INCOME > EXPENSES = PROFIT

EXPENSES > INCOME = LOSS

STRUCTURE AND KEY

COMPONENTS

Revenue /

Sales

Cost of

Goods Sold

Gross Profit

Operating

Profit

DepreciationNet Profit

OPEX

A few key lessons

It is not about CASH

MATCHING

Depreciation / Amortisation

To match the usage of the asset to the operations of

the business…

Example: Truck or Computers

Amortisation

Example: Patents

1

2

3

FORMAT OF P&L ACCOUNTParticulars Amount

Year 1 Year 2

Sales / Revenue / Top line

Less: Cost of Goods Sold (costs that can be directly

attributed to the manufacturing / trading / service

process)

Gross Profit

Less: Overheads (costs that cannot be directly attributed

to any one manufacturing / trading / service process)

Operating Profit (also known as EBITDA – Earnings before

Interest, Tax, Depreciation & Amortization)

Less: Depreciation

Earnings / Profit before Interest & Tax (EBIT)

Less: Interest

Earnings / Profit before Tax (PBT)

Less: Tax

Earnings / Profit after Tax (PAT) / Bottomline

FORMAT OF P&L ACCOUNTParticulars Amount

Year 1 Year 2

Sales / Revenue / Top line 750 1000

Less: Cost of Goods Sold (costs that can be directly

attributed to the manufacturing / trading / service

process)

250 350

Gross Profit 500 650

Less: Overheads (costs that cannot be directly attributed

to any one manufacturing / trading / service process)

300 400

Operating Profit (also known as EBITDA – Earnings before

Interest, Tax, Depreciation & Amortization)

200 250

Less: Depreciation 50 60

Earnings / Profit before Interest & Tax (EBIT) 150 190

Less: Interest 10 15

Earnings / Profit before Tax (PBT) 140 175

Less: Tax 40 70

Earnings / Profit after Tax (PAT) / Bottomline 100 105

Using a P&L statement for decisions

Analysis over a period

Yearly

Half yearly

Quarterly

Comparison with Budgets

Variance

Comparison with Competitors

Topline

Bottomline

Operating Profit

What could a falling Gross Profit Margin mean?

Using a P&L statement for decisions

Key Ratios

Gross Profit Margin = (Gross Profit / Sales)

Pricing / Volumes

Direct Expenses

Operation Profit Margin = (EBITDA / Sales)

Indirect or Operating Expenses

Net Profit Margin = (Net Profit / Sales)

Interest, Taxes, One Time charges

Earnings Per Share (EPS) = (Net Profit / No. of shares)

The shareholders / owners pie

Topline

Bottomline

Operating Profit

What concerns the shareholders the most?

Learning Finance by Doing

Learning by Doing – Simulation driven

Extensive interactive content around key concepts

Practice what you learn

Ask as many questions, clarify doubts and interact

with facilitators

Complete Help and Support available

A Gift for you

Profit and Loss – interactive presentation from the

course – exclusively for you – Click Here

Also, sign up for the FREE simulation trial – Click

Here

Thank You

Key Terms revisited

Matching

Top line

Bottom line

Operating Profit / EBITDA

Depreciation / Amortisation

Earnings Per Share