HOW TO ANALYSE PROFIT AND LOSS STATEMENT

it is the financial statement that summarizes revenues,expenses,operating profit margins,taxes which are collected by government and finally net profit which the company made during the fiscal year.it clearly shows how the company is performing and tells us is the company is growing or static over a period of time.the P/L statement of company will be posted in every fiscal year.

MAIN ASPECTS OF P/L STATEMENT

1)sales or revenues 

the sales numbers in p/l report shows us how much amount the company is generated from its all operational activities done in the given fiscal year 

2)expenses

it shows the expenses of the company like expenses of manufacturing goods and expenses of advertisement or marketing activity done in the given year and many more

3)operating profit

by subtracting sales with the expenses we get operating profit                               [sales-expenses]

4)other income

it tells us company had a other source of income which may came in the foam of interest from the loan given to its subsidiaries or by doing other activities

5)interest

it is considered as non operating activity .where the company's interest to pay for its loans

 

6)depreciation and amortization

depreciation tells us the indirect loss of a company .which is not added to expenses .for clear understanding depreciation means ,if we bought a car and sold after 10 years then the value car will be depreciated similarly value of company's equipment like machinery,working tool will also lose their value along with time so the estimated value loss is calculated which is called depreciation and amortization amount

7)profit before tax (PBT)

pbt numbers come when including other income and excluding company's interest,depreciation amounts

8)tax%

it tells us how much percentage of tax collected by the government

9)net profit(PAT)

net profit is the total profit that the company has generated during the given fiscal year

topline numbers means sales of the company

bottom line numbers means total net profit of the company

we should see the CAGR(compounded annual growth rate) of the company' topline and bottomline numbers

when we analysing company's Financial Reports we should not only see the profit and loss statement as it the first step of research. second we should analyse balance sheet which contains assets and liabilities columns,third we should analyze cashflow statement which very important as it tells us all company's activities 

lastly, warren buffet had also given more importance to the company's free cash flow(CFF),which gives a holistic view on company operations and its intrinsic value

in my future blogs i will give you many info in fundamentals of company    

[disclaimer the above content is provided from taking various resources and above content is purely my opinion,for investment try to do your own research or consult your financial advisor]