Description
A profit and loss statement, also known as an Income statement, lists the company's income and expenses. P&L is a part of a company's Financial statements. It shows the amount of profit that a company may be making or the extent of losses it may be incurring. A profit and loss statement is generally finalized every month, quarter, or year.
Example
Some of the major components of a P&L statement are revenue, cost of goods sold, marketing expenses, selling expenses, interest expense, tax, net income, etc.
Why it matters
A P&L statement is a glimpse of a company's financial performance on an accrual basis. It can help answer questions like whether the company able to sell more of its products/services (vis-a-vis higher revenue), whether it is able to reduce costs (vis-a-vis lower operating expenses), and whether it has been able to improve its profitability (vis-a-vis higher net income).