A profit and loss analysis compares a company’s income and expenses to determine financial success or failure. It is a common part of annual reports and project management, and can also be used for personal finances.
A profit and loss analysis provides a detailed view of a company’s income and expenses. It can be used to determine the financial success or failure of a project, department, program or enterprise. This analysis is a common part of annual reports and other similar documents required by business owners, shareholders or government agencies.
In its most basic form, a profit and loss analysis compares the amount of money a company made with the amount paid, with the intent of determining whether the company lost or gained during the specified time period. On one side of the equation are transactions in which funds have been removed from the company’s pool of total assets. This may include not only costs attributable to situations such as lawsuit payments or overpayments for assets, but also to normal operating expenses such as employee wages, overheads or materials. The sum total of all costs is called the “gross loss”.
On the other side of the equation are all the funds placed in the company’s total asset pool. This may include income from day-to-day sales as well as special real estate sales or financing initiatives. This total is called “gross profit”. By subtracting gross loss from gross profit, a business can find the net loss or profit – the total amount gained or lost after considering all factors.
Many companies do a profit and loss analysis every year. In fact, in companies listed on the stock exchange, the process is generally mandatory. It may also be required of organizations that are required to report to government or other agencies.
This type of analysis is also a common step in project management. In this case, it will determine whether a given project has been profitable and whether or not profit targets have been met. It can also help identify areas of unnecessary or unexpected loss as well as areas of unexpected gain.
In some situations, an individual might be looking at his or her personal profits and losses. Someone who invests regularly, for example, might want to conduct an analysis of a particular quarter’s or year’s transactions to make sure that he is investing his money wisely. An individual who has set a specific budget might also look to see if she has saved money or gone into debt and to ascertain how she has spent her money over a specific period of time.
Protect your devices with Threat Protection by NordVPN
