Glossary

Profit and Loss Statement (P&L)

Definition

A Profit and Loss Statement (P&L or PNL), also known as an income statement, is a financial document that summarizes a company's revenues, expenses, and profits (or losses) over a specific period. It is a key financial statement used to evaluate a business’s performance and profitability.

Key Components of a P&L Statement

  1. Revenue (Top Line): The total income generated from sales of goods or services.
  2. Cost of Goods Sold (COGS): The direct costs associated with producing goods or delivering services.
  3. Gross Profit: Revenue minus COGS.
  4. Operating Expenses: Indirect costs, such as rent, salaries, and marketing.
  5. Operating Profit: Gross profit minus operating expenses.
  6. Net Profit (Bottom Line): The final profit after all expenses, taxes, and interest are deducted.

Purpose of a P&L Statement

  • Performance Evaluation: Tracks profitability over time.
  • Decision-Making: Helps identify areas to cut costs or increase revenue.
  • Investor Insights: Provides transparency into the company's financial health.
  • Compliance: Required for tax filings and regulatory reporting.

Benefits of a P&L Statement

  • Clear Profitability Insights: Shows how efficiently the company generates profit.
  • Cost Control: Highlights areas where expenses can be reduced.
  • Investment Readiness: A must-have for attracting investors or securing loans.

‍

What’s the difference between a P&L statement and a balance sheet?

Read more

A P&L statement measures profitability over a period, while a balance sheet provides a snapshot of a company’s financial position at a specific point in time.

How often should I prepare a P&L statement?

Read more

Typically, businesses prepare P&L statements monthly, quarterly, and annually to monitor performance and meet reporting requirements.

Can startups use P&L statements?

Read more

Yes, startups use P&L statements to track financial performance and project future earnings when pitching to investors.

What is the importance of the net profit (bottom line)?

Read more

The net profit indicates the company’s overall profitability after all expenses, helping stakeholders gauge its financial health.

Ready to kick-start your own fundraising journey?

Or want to know more about pre-seed funding?

Contact us
Pitchdrive
Our storyHow we workOur teamPortfolioStoriesAcademyGlossary
Locations
Antwerp (HQ)GhentAmsterdamBerlinBarcelonaLondon
© 2025 Pitchdrive. All right reserved.
Privacy PolicyESGTerms of ServiceCookies Settings