The Profit & Loss statement gives an idea about the profitability of a business. We subtract revenues from different types of costs to obtain Net income (the company’s bottom line result). Net income (also referred to as net profit or loss) gives us an idea of the economic value generated by the firm’s activities. This is one of the fundamental documents used by business owners and management to study profitability and sustainability of a company’s operations.
Very often the Profit & Loss statements of a company for various periods are displayed together in order to be able to compare how financial performance evolved over time.
Some other related topics you might be interested to explore are Balance Sheet, Cash Flow, and 3-Statement Model.
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Profit and Loss is among the topics included in the Corporate Finance module of the CFA Level 1 Curriculum.
