How do I analyze the profit and loss statement of a stock?
A profit and loss statement (P&L), or income statement or statement of operations, is a financial report that provides a summary of a companys revenues, expenses, and profits/losses over a given period of time. The P&L statement shows a companys ability to generate sales, manage expenses, and create profits. It is prepared based on accounting principles that include revenue recognition, matching, and accruals, which makes it different from the cash flow statement. Structure of the Profit and Loss Statement A companys statement of profit and loss is portrayed over a period of time, typically a month, quarter, or fiscal year. The main categories that can be found on the P&L include: Revenue (or Sales) Cost of Goods Sold (or Cost of Sales) Selling, General & Administrative (SG&A) Expenses Marketing and Advertising Technology/Research & Development Interest Expense Taxes Net Income