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How to create a profit and loss statement (with examples)
Written by
Updated 29 January 2026
What is a profit or loss statement?
How to create a profit and loss statement
When do you create a P&L statement?
Standard terms in a profit and loss statement
One financial statement essential to all businesses is the profit and loss statement. It's necessary to know the various elements, regardless of the type of accounting software you use. You can use this statement to increase the productivity of your business. In this article, we look at what a profit and loss statement means, why it's important in running a business and how to create a profit and loss statement to get a clear idea of your business' finances.
What is a profit or loss statement?
A profit and loss (P&L) statement, also called a statement of operations, income statement or a statement of financial performance, is a financial statement that summarises a company's sales, expenditures and net profit for a specified time. This statement shows a company's production capacity, controls expenses and monitors profits. A financial analyst may create a P&L statement, besides the balance sheet and funds flow statement, annually or at intervals. A P&L statement differs from a funds flow statement since you can create a P&L using accounting concepts, such as revenue principle and accrual accounting.
How to create a profit and loss statement
Adequate knowledge of how to create a profit and loss statement helps your business's growth. It's a central financial statement that depicts your business's income, expenses and profit or loss over a specified time. Even if your business or startup can function without being an investor or a financial institution funding you, an income statement displays your ability to allocate resources. It also gives you valuable information about your business' finances. Here are the steps to create an income statement that evaluates your business financial performance:
1. Choose how often you intend to create a P&L statement
Deciding on how often you create this report is the first step. The most typical time frames are weekly, monthly, quarterly or yearly. The number of times you make an income statement depends on why your business wants it. For example, creating an account once within four months shows you a broader context of your income and losses over four months. It may be challenging to keep track of any changes or identify potential concerns if you only create the statement yearly.
2. Write the revenue
Write out the money your business made from sales. If your company has multiple sources of income, you can divide it into subsections. You can get this information from your bank statement of account.
3. Cost of the goods sold
In a separate column, calculate the cost of goods plus the cost of procuring raw materials, labour and other production expenses. Cost of Goods Sold (COGS) is also known as direct costs.
COGS = beginning inventory + purchases – ending inventory.
4. Get the gross profit
Subtract the costs of goods sold from the net income. This is the incurred profit before the deduction of tax and other expenses.
Gross profit = Revenue – COGS.
5. Operational costs and EBITDA
Compile a list of your operational costs. This list is where you add up the rents, employees' salary, adverts, utilities, amongst others. Then to get your earnings before interests, tax, depreciation, amortisation (EBITDA), subtract the operational costs from the gross profit.
6. Net income
After getting your EBITDA, you may subtract taxes, depreciation, interests and amortisation.
Net income= EBITDA –(taxes + interests + depreciation + amortisation)
After calculating your net income, if the result you have is positive, you made a profit. Still, if the result is negative, that is a loss.
When do you create a P&L statement?
Below are occasions when you can create a profit and loss statement:
P&L at a regular interval
Businesses prepare and analyse their profit and loss statements at least quarterly. Examining this report aids the company in making important decisions and preparing tax returns. You can use the tax returns information from the P&L to calculate total revenue and determine how much income tax your company has to pay.
Pro Forma P&L
You can create a P&L when you are starting a new firm. Pro forma P&L means your company forecasts it for the future and this method allows you to create a P&L statement without having the complete information. When requesting funding for your new business or project, having a pro forma P&L is essential.
Standard terms in a profit and loss statement
To avoid a situation where the information a P&L statement presents appears confusing, familiarise yourself with the following terminologies and what they mean. Doing this helps you understand and properly interpret a statement. The terms are:
Net income:
Network income is a significant term you'd see on an income statement and it's the difference between the total revenue and total cost.
Revenue:
Revenue is the total income you make from goods and services sales. Other sources of revenue include interest rates on business bank accounts and tax refunds.
Expenses:
This is the amount of money your company spends. You also add up the operational costs such as raw materials, tax, adverts, bank charges, utilities, refreshments, Internet and software subscription, rent and your employees' salary.
Cost of goods sold:
Cost of goods sold is the cost of manufacturing and selling a product or service. It considers the resources, labour costs and required time to execute the tasks.
Gross profit:
Gross profit, also known as gross income or gross margin, is the difference between your revenue and the production expenses. It's the incurred profit before the deduction of tax and other expenses.
Depreciation:
This is the decrease in the value of company assets until it becomes insignificant. Examples of such assets include machines, buildings and equipment.
EBIT:
EBIT is the acronym for 'earnings before interest and taxes'. You can get EBIT by subtracting operational costs from gross profit. Sometimes you can have EBITDA, which stands for 'earnings before interest, taxes, depreciation and amortisation'.
Draw:
This is the money you pay to the company's owner. You may deduct it from the company's revenue.
Income accessible to shareholders:
If investors fund your business, this section is crucial. Income accessible to shareholders is the net after-tax profit, deducting investors' returns.
Related:
How to calculate variable costs (with components and examples)
Example of a profit and loss statement
Below is an example of Raj and Roj Wares, an e-commerce company's quarterly P&L statement.
Income
Sales of goods in-store: £20,000.
Online sales: £23,000
Other income: £2000
Total revenue: £45,000
Cost of goods sold
: £20,000*
Gross profit:
income- cost of goods sold = £25,000.
Operating costs
Utilities: £300
Wages: £500
Rent: £75
Adverts: £25
Logistics: £50
Subscription fee: £20
Stationery: £20
Total operation costs: £5940
EBITDA:
gross profit–total operation costs.
= 25,000- 5940.
=£19,060.
Others:
Taxes: 4500
Interests: £800
Depreciation: £2000
Net income:
EBITDA- ( T+ I + D)
= 19,060 – (4500 + 800 + 2000)
=£11,760
This company makes a profit of £11,760 after four months. Most of its income is from online sales and wages are the company's highest operational cost. When the business owners consider these figures, they may decide to develop and improve their online sales to increase profits.
Steps in creating a pro forma P&L
A financial institution or an investor may request a pro forma P&L for business startups before investing. Creating this financial report shows a potential investor the breakdown of how profitable your business might be. The following are the steps to take to complete your pro forma statement:
Begin by making a list of all conceivable expenses and overestimating them.
Make a list of your expected sales.
Underestimate how much money you believe can serve as income.
Subtract the expenses from the income.
Add them together to get an estimate of how much money your business requires to be operational.
Analysis of a profit and loss statement
One of the financial responsibilities of a financial manager is to examine a company's P&L to offer insights into its economic viability. The following are examples of P&L analysis:
year-on-year comparisons and industry benchmark
if metrics are growing or declining according to market research
return on equity and return on assets are two types of return rates
valuation metrics: P/E ratio, EV/EBITA, amongst others
margins: operating margin, net profit margin, gross profit margin and EBITDA margin
Related:
What are metrics in business? (Plus examples and formula)
How does a profit and loss statement differ from a balance sheet?
These two financial statements monitor cash flow, yet they have different purposes. A balance sheet depicts your company's finances in greater detail. It contains information about your assets, liabilities and working capital that the P&L statement lacks. The P&L is better for analysing your profits and losses over a longer time. This allows you to notice changes, such as spending growing faster than income. It also shows you if your profit is dropping despite increasing sales. A P&L statement can evaluate the feasibility of starting a new business or project and helps to inform your decisions, especially when to:
extend your company's reach in a particular geographic region
investigate a new market or start a new project
increase your capacity for production
hire more permanent employees or freelancers
reduce the supply of a product with a low-profit margin and a high cost of production
put more money into a new unit or product.
The information on this site is provided as a courtesy and for informational purposes only. Indeed is not a career or legal advisor and does not guarantee job interviews or offers.
Finance & accounting |
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1. [Career development](https://uk.indeed.com/career-advice/career-development)
2. How to create a profit and loss statement (with examples)
# How to create a profit and loss statement (with examples)
Written by
Indeed Editorial Team
Updated 29 January 2026
### On this page:
- [What is a profit or loss statement?](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-what-is-a-profit-or-loss-statement)
- [How to create a profit and loss statement](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-how-to-create-a-profit-and-loss-statement)
- [When do you create a P\&L statement?](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-when-do-you-create-a-pl-statement)
- [Standard terms in a profit and loss statement](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-standard-terms-in-a-profit-and-loss-statement)
See more
### On this page:
- [What is a profit or loss statement?](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-what-is-a-profit-or-loss-statement)
- [How to create a profit and loss statement](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-how-to-create-a-profit-and-loss-statement)
- [When do you create a P\&L statement?](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-when-do-you-create-a-pl-statement)
- [Standard terms in a profit and loss statement](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-standard-terms-in-a-profit-and-loss-statement)
See more
One financial statement essential to all businesses is the profit and loss statement. It's necessary to know the various elements, regardless of the type of accounting software you use. You can use this statement to increase the productivity of your business. In this article, we look at what a profit and loss statement means, why it's important in running a business and how to create a profit and loss statement to get a clear idea of your business' finances.
## What is a profit or loss statement?
A profit and loss (P\&L) statement, also called a statement of operations, income statement or a statement of financial performance, is a financial statement that summarises a company's sales, expenditures and net profit for a specified time. This statement shows a company's production capacity, controls expenses and monitors profits. A financial analyst may create a P\&L statement, besides the balance sheet and funds flow statement, annually or at intervals. A P\&L statement differs from a funds flow statement since you can create a P\&L using accounting concepts, such as revenue principle and accrual accounting.
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## How to create a profit and loss statement
Adequate knowledge of how to create a profit and loss statement helps your business's growth. It's a central financial statement that depicts your business's income, expenses and profit or loss over a specified time. Even if your business or startup can function without being an investor or a financial institution funding you, an income statement displays your ability to allocate resources. It also gives you valuable information about your business' finances. Here are the steps to create an income statement that evaluates your business financial performance:
### 1\. Choose how often you intend to create a P\&L statement
Deciding on how often you create this report is the first step. The most typical time frames are weekly, monthly, quarterly or yearly. The number of times you make an income statement depends on why your business wants it. For example, creating an account once within four months shows you a broader context of your income and losses over four months. It may be challenging to keep track of any changes or identify potential concerns if you only create the statement yearly.
### 2\. Write the revenue
Write out the money your business made from sales. If your company has multiple sources of income, you can divide it into subsections. You can get this information from your bank statement of account.
### 3\. Cost of the goods sold
In a separate column, calculate the cost of goods plus the cost of procuring raw materials, labour and other production expenses. Cost of Goods Sold (COGS) is also known as direct costs.COGS = beginning inventory + purchases – ending inventory.
### 4\. Get the gross profit
Subtract the costs of goods sold from the net income. This is the incurred profit before the deduction of tax and other expenses.Gross profit = Revenue – COGS.
### 5\. Operational costs and EBITDA
Compile a list of your operational costs. This list is where you add up the rents, employees' salary, adverts, utilities, amongst others. Then to get your earnings before interests, tax, depreciation, amortisation (EBITDA), subtract the operational costs from the gross profit.
### 6\. Net income
After getting your EBITDA, you may subtract taxes, depreciation, interests and amortisation.Net income= EBITDA –(taxes + interests + depreciation + amortisation)After calculating your net income, if the result you have is positive, you made a profit. Still, if the result is negative, that is a loss.
## When do you create a P\&L statement?
Below are occasions when you can create a profit and loss statement:
### P\&L at a regular interval
Businesses prepare and analyse their profit and loss statements at least quarterly. Examining this report aids the company in making important decisions and preparing tax returns. You can use the tax returns information from the P\&L to calculate total revenue and determine how much income tax your company has to pay.
### Pro Forma P\&L
You can create a P\&L when you are starting a new firm. Pro forma P\&L means your company forecasts it for the future and this method allows you to create a P\&L statement without having the complete information. When requesting funding for your new business or project, having a pro forma P\&L is essential.
## Standard terms in a profit and loss statement
To avoid a situation where the information a P\&L statement presents appears confusing, familiarise yourself with the following terminologies and what they mean. Doing this helps you understand and properly interpret a statement. The terms are:
- Net income: Network income is a significant term you'd see on an income statement and it's the difference between the total revenue and total cost.
- Revenue: Revenue is the total income you make from goods and services sales. Other sources of revenue include interest rates on business bank accounts and tax refunds.
- Expenses: This is the amount of money your company spends. You also add up the operational costs such as raw materials, tax, adverts, bank charges, utilities, refreshments, Internet and software subscription, rent and your employees' salary.
- Cost of goods sold: Cost of goods sold is the cost of manufacturing and selling a product or service. It considers the resources, labour costs and required time to execute the tasks.
- Gross profit: Gross profit, also known as gross income or gross margin, is the difference between your revenue and the production expenses. It's the incurred profit before the deduction of tax and other expenses.
- Depreciation: This is the decrease in the value of company assets until it becomes insignificant. Examples of such assets include machines, buildings and equipment.
- EBIT: EBIT is the acronym for 'earnings before interest and taxes'. You can get EBIT by subtracting operational costs from gross profit. Sometimes you can have EBITDA, which stands for 'earnings before interest, taxes, depreciation and amortisation'.
- Draw: This is the money you pay to the company's owner. You may deduct it from the company's revenue.
- Income accessible to shareholders: If investors fund your business, this section is crucial. Income accessible to shareholders is the net after-tax profit, deducting investors' returns.
Related:
[How to calculate variable costs (with components and examples)](https://uk.indeed.com/career-advice/career-development/how-to-calculate-variable-cost)
## Example of a profit and loss statement
Below is an example of Raj and Roj Wares, an e-commerce company's quarterly P\&L statement.Income
- Sales of goods in-store: £20,000.
- Online sales: £23,000
- Other income: £2000
- Total revenue: £45,000
Cost of goods sold: £20,000\*Gross profit: income- cost of goods sold = £25,000.Operating costs
- Utilities: £300
- Wages: £500
- Rent: £75
- Adverts: £25
- Logistics: £50
- Subscription fee: £20
- Stationery: £20
Total operation costs: £5940EBITDA: gross profit–total operation costs.\= 25,000- 5940.\=£19,060.Others:
- Taxes: 4500
- Interests: £800
- Depreciation: £2000
Net income: EBITDA- ( T+ I + D)\= 19,060 – (4500 + 800 + 2000)\=£11,760This company makes a profit of £11,760 after four months. Most of its income is from online sales and wages are the company's highest operational cost. When the business owners consider these figures, they may decide to develop and improve their online sales to increase profits.
## Steps in creating a pro forma P\&L
A financial institution or an investor may request a pro forma P\&L for business startups before investing. Creating this financial report shows a potential investor the breakdown of how profitable your business might be. The following are the steps to take to complete your pro forma statement:
- Begin by making a list of all conceivable expenses and overestimating them.
- Make a list of your expected sales.
- Underestimate how much money you believe can serve as income.
- Subtract the expenses from the income.
- Add them together to get an estimate of how much money your business requires to be operational.
## Analysis of a profit and loss statement
One of the financial responsibilities of a financial manager is to examine a company's P\&L to offer insights into its economic viability. The following are examples of P\&L analysis:
- year-on-year comparisons and industry benchmark
- if metrics are growing or declining according to market research
- return on equity and return on assets are two types of return rates
- valuation metrics: P/E ratio, EV/EBITA, amongst others
- margins: operating margin, net profit margin, gross profit margin and EBITDA margin
Related:
[What are metrics in business? (Plus examples and formula)](https://uk.indeed.com/career-advice/career-development/metrics-in-business)
How does a profit and loss statement differ from a balance sheet? These two financial statements monitor cash flow, yet they have different purposes. A balance sheet depicts your company's finances in greater detail. It contains information about your assets, liabilities and working capital that the P\&L statement lacks. The P\&L is better for analysing your profits and losses over a longer time. This allows you to notice changes, such as spending growing faster than income. It also shows you if your profit is dropping despite increasing sales. A P\&L statement can evaluate the feasibility of starting a new business or project and helps to inform your decisions, especially when to:
- extend your company's reach in a particular geographic region
- investigate a new market or start a new project
- increase your capacity for production
- hire more permanent employees or freelancers
- reduce the supply of a product with a low-profit margin and a high cost of production
- put more money into a new unit or product.
\
The information on this site is provided as a courtesy and for informational purposes only. Indeed is not a career or legal advisor and does not guarantee job interviews or offers.
\
Finance & accounting
Share:
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| Readable Markdown | 1. [Career development](https://uk.indeed.com/career-advice/career-development)
2. How to create a profit and loss statement (with examples)
Written by
Updated 29 January 2026
- [What is a profit or loss statement?](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-what-is-a-profit-or-loss-statement)
- [How to create a profit and loss statement](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-how-to-create-a-profit-and-loss-statement)
- [When do you create a P\&L statement?](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-when-do-you-create-a-pl-statement)
- [Standard terms in a profit and loss statement](https://uk.indeed.com/career-advice/career-development/how-to-create-profit-and-loss-statement#toc-standard-terms-in-a-profit-and-loss-statement)
One financial statement essential to all businesses is the profit and loss statement. It's necessary to know the various elements, regardless of the type of accounting software you use. You can use this statement to increase the productivity of your business. In this article, we look at what a profit and loss statement means, why it's important in running a business and how to create a profit and loss statement to get a clear idea of your business' finances.
## What is a profit or loss statement?
A profit and loss (P\&L) statement, also called a statement of operations, income statement or a statement of financial performance, is a financial statement that summarises a company's sales, expenditures and net profit for a specified time. This statement shows a company's production capacity, controls expenses and monitors profits. A financial analyst may create a P\&L statement, besides the balance sheet and funds flow statement, annually or at intervals. A P\&L statement differs from a funds flow statement since you can create a P\&L using accounting concepts, such as revenue principle and accrual accounting.
## How to create a profit and loss statement
Adequate knowledge of how to create a profit and loss statement helps your business's growth. It's a central financial statement that depicts your business's income, expenses and profit or loss over a specified time. Even if your business or startup can function without being an investor or a financial institution funding you, an income statement displays your ability to allocate resources. It also gives you valuable information about your business' finances. Here are the steps to create an income statement that evaluates your business financial performance:
### 1\. Choose how often you intend to create a P\&L statement
Deciding on how often you create this report is the first step. The most typical time frames are weekly, monthly, quarterly or yearly. The number of times you make an income statement depends on why your business wants it. For example, creating an account once within four months shows you a broader context of your income and losses over four months. It may be challenging to keep track of any changes or identify potential concerns if you only create the statement yearly.
### 2\. Write the revenue
Write out the money your business made from sales. If your company has multiple sources of income, you can divide it into subsections. You can get this information from your bank statement of account.
### 3\. Cost of the goods sold
In a separate column, calculate the cost of goods plus the cost of procuring raw materials, labour and other production expenses. Cost of Goods Sold (COGS) is also known as direct costs.COGS = beginning inventory + purchases – ending inventory.
### 4\. Get the gross profit
Subtract the costs of goods sold from the net income. This is the incurred profit before the deduction of tax and other expenses.Gross profit = Revenue – COGS.
### 5\. Operational costs and EBITDA
Compile a list of your operational costs. This list is where you add up the rents, employees' salary, adverts, utilities, amongst others. Then to get your earnings before interests, tax, depreciation, amortisation (EBITDA), subtract the operational costs from the gross profit.
### 6\. Net income
After getting your EBITDA, you may subtract taxes, depreciation, interests and amortisation.Net income= EBITDA –(taxes + interests + depreciation + amortisation)After calculating your net income, if the result you have is positive, you made a profit. Still, if the result is negative, that is a loss.
## When do you create a P\&L statement?
Below are occasions when you can create a profit and loss statement:
### P\&L at a regular interval
Businesses prepare and analyse their profit and loss statements at least quarterly. Examining this report aids the company in making important decisions and preparing tax returns. You can use the tax returns information from the P\&L to calculate total revenue and determine how much income tax your company has to pay.
### Pro Forma P\&L
You can create a P\&L when you are starting a new firm. Pro forma P\&L means your company forecasts it for the future and this method allows you to create a P\&L statement without having the complete information. When requesting funding for your new business or project, having a pro forma P\&L is essential.
## Standard terms in a profit and loss statement
To avoid a situation where the information a P\&L statement presents appears confusing, familiarise yourself with the following terminologies and what they mean. Doing this helps you understand and properly interpret a statement. The terms are:
- Net income: Network income is a significant term you'd see on an income statement and it's the difference between the total revenue and total cost.
- Revenue: Revenue is the total income you make from goods and services sales. Other sources of revenue include interest rates on business bank accounts and tax refunds.
- Expenses: This is the amount of money your company spends. You also add up the operational costs such as raw materials, tax, adverts, bank charges, utilities, refreshments, Internet and software subscription, rent and your employees' salary.
- Cost of goods sold: Cost of goods sold is the cost of manufacturing and selling a product or service. It considers the resources, labour costs and required time to execute the tasks.
- Gross profit: Gross profit, also known as gross income or gross margin, is the difference between your revenue and the production expenses. It's the incurred profit before the deduction of tax and other expenses.
- Depreciation: This is the decrease in the value of company assets until it becomes insignificant. Examples of such assets include machines, buildings and equipment.
- EBIT: EBIT is the acronym for 'earnings before interest and taxes'. You can get EBIT by subtracting operational costs from gross profit. Sometimes you can have EBITDA, which stands for 'earnings before interest, taxes, depreciation and amortisation'.
- Draw: This is the money you pay to the company's owner. You may deduct it from the company's revenue.
- Income accessible to shareholders: If investors fund your business, this section is crucial. Income accessible to shareholders is the net after-tax profit, deducting investors' returns.
Related: [How to calculate variable costs (with components and examples)](https://uk.indeed.com/career-advice/career-development/how-to-calculate-variable-cost)
## Example of a profit and loss statement
Below is an example of Raj and Roj Wares, an e-commerce company's quarterly P\&L statement.Income
- Sales of goods in-store: £20,000.
- Online sales: £23,000
- Other income: £2000
- Total revenue: £45,000
Cost of goods sold: £20,000\*Gross profit: income- cost of goods sold = £25,000.Operating costs
- Utilities: £300
- Wages: £500
- Rent: £75
- Adverts: £25
- Logistics: £50
- Subscription fee: £20
- Stationery: £20
Total operation costs: £5940EBITDA: gross profit–total operation costs.\= 25,000- 5940.\=£19,060.Others:
- Taxes: 4500
- Interests: £800
- Depreciation: £2000
Net income: EBITDA- ( T+ I + D)\= 19,060 – (4500 + 800 + 2000)\=£11,760This company makes a profit of £11,760 after four months. Most of its income is from online sales and wages are the company's highest operational cost. When the business owners consider these figures, they may decide to develop and improve their online sales to increase profits.
## Steps in creating a pro forma P\&L
A financial institution or an investor may request a pro forma P\&L for business startups before investing. Creating this financial report shows a potential investor the breakdown of how profitable your business might be. The following are the steps to take to complete your pro forma statement:
- Begin by making a list of all conceivable expenses and overestimating them.
- Make a list of your expected sales.
- Underestimate how much money you believe can serve as income.
- Subtract the expenses from the income.
- Add them together to get an estimate of how much money your business requires to be operational.
## Analysis of a profit and loss statement
One of the financial responsibilities of a financial manager is to examine a company's P\&L to offer insights into its economic viability. The following are examples of P\&L analysis:
- year-on-year comparisons and industry benchmark
- if metrics are growing or declining according to market research
- return on equity and return on assets are two types of return rates
- valuation metrics: P/E ratio, EV/EBITA, amongst others
- margins: operating margin, net profit margin, gross profit margin and EBITDA margin
Related: [What are metrics in business? (Plus examples and formula)](https://uk.indeed.com/career-advice/career-development/metrics-in-business)
How does a profit and loss statement differ from a balance sheet? These two financial statements monitor cash flow, yet they have different purposes. A balance sheet depicts your company's finances in greater detail. It contains information about your assets, liabilities and working capital that the P\&L statement lacks. The P\&L is better for analysing your profits and losses over a longer time. This allows you to notice changes, such as spending growing faster than income. It also shows you if your profit is dropping despite increasing sales. A P\&L statement can evaluate the feasibility of starting a new business or project and helps to inform your decisions, especially when to:
- extend your company's reach in a particular geographic region
- investigate a new market or start a new project
- increase your capacity for production
- hire more permanent employees or freelancers
- reduce the supply of a product with a low-profit margin and a high cost of production
- put more money into a new unit or product.
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