Understanding Profit and Loss Statement: A Key Tool for Investors

When it comes to investment analysis, many people are often afraid of financial statements, but the truth is Profit and Loss Statement (P&L) or called the income statement is not as complicated as it seems. It’s simply a story of numbers—revenue, expenses, and ultimately, how much money the business has left.

Profit and Loss Statement: Where is it in finance?

In the simplest terms, Profit and Loss (P&L) is a report that tells us:

• Where does the business earn its money? (Revenue)
• Where does the business spend its money? (Expenses)
• What is the actual remaining amount? (Profit or Loss)

It is one of the three main financial statements (along with the Balance Sheet and Cash Flow Statement) and is the clearest lens to see whether a business is “making money” or not.

Investors and managers pay close attention to the Profit and Loss Statement because it shows the true profit-generating efficiency. It also helps in strategic planning for sustainable and growing profits in the future.

Basic formula: Learn about Profit from a new perspective

Calculating the Profit and Loss Statement is very simple:

Total Revenue (Total Revenue) – Total Expenses (Total Expenses) = Profit or Loss (Profit/Loss)

Let’s break down the components:

• Total Revenue: Cash or value received from selling goods and services
• Total Expenses: All outgoing money for rent, advertising, salaries, and others
• Profit or Loss: The difference between the two — if revenue > expenses = profit; if the opposite = loss

Different levels of Profit: Why are there many types?

Most importantly, P&L does not just give a single “profit” number but provides several figures that often tell different stories:

###Gross Profit (กำไรขั้นต้น) Formula: Revenue – Cost of Goods Sold

This indicates: how much money the business keeps from sales before deducting other expenses. It’s an indicator of whether your product/service’s margin (Margin) is good or not.

###Operating Profit (EBIT - Operating profit) Formula: Gross Profit – Normal operating expenses (Sales, Admin, etc.)

This shows: after deducting general expenses, is the business truly profitable? This is the “heart” of the business.

###Net Profit (Net Profit) Formula: Total Revenue – Total Expenses (Including interest, taxes)

This reveals: the “real” profit remaining in the business after all expenses.