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Demystifying profit and loss statement webinar
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Transcript of Demystifying profit and loss statement webinar
Demystifying
Profit & Loss Statement
October 30, 2014
WEBINAR
Where do you stand today in terms of understanding
the P&L statement?
Agenda
The 3 key financial statements
Profit and Loss Statement
Structure and key components
How does it help you in business decisions
What you should be asking?
Learning by Doing – Finance 360 Degrees
Q & A
3 Key Financial Statements
Balance Sheet
Cash Flow Statement
Profit & Loss Statement
Profit & Loss Statement
A statement of income and expenses around the
operations of the company
For a particular PERIOD of time
You sell your goods or services – INCOME
You make expenses to run operations – EXPENSES
INCOME > EXPENSES = PROFIT
EXPENSES > INCOME = LOSS
STRUCTURE AND KEY
COMPONENTS
Revenue /
Sales
Cost of
Goods Sold
Gross Profit
Operating
Profit
DepreciationNet Profit
OPEX
A few key lessons
It is not about CASH
MATCHING
Depreciation / Amortisation
To match the usage of the asset to the operations of
the business…
Example: Truck or Computers
Amortisation
Example: Patents
1
2
3
FORMAT OF P&L ACCOUNTParticulars Amount
Year 1 Year 2
Sales / Revenue / Top line
Less: Cost of Goods Sold (costs that can be directly
attributed to the manufacturing / trading / service
process)
Gross Profit
Less: Overheads (costs that cannot be directly attributed
to any one manufacturing / trading / service process)
Operating Profit (also known as EBITDA – Earnings before
Interest, Tax, Depreciation & Amortization)
Less: Depreciation
Earnings / Profit before Interest & Tax (EBIT)
Less: Interest
Earnings / Profit before Tax (PBT)
Less: Tax
Earnings / Profit after Tax (PAT) / Bottomline
FORMAT OF P&L ACCOUNTParticulars Amount
Year 1 Year 2
Sales / Revenue / Top line 750 1000
Less: Cost of Goods Sold (costs that can be directly
attributed to the manufacturing / trading / service
process)
250 350
Gross Profit 500 650
Less: Overheads (costs that cannot be directly attributed
to any one manufacturing / trading / service process)
300 400
Operating Profit (also known as EBITDA – Earnings before
Interest, Tax, Depreciation & Amortization)
200 250
Less: Depreciation 50 60
Earnings / Profit before Interest & Tax (EBIT) 150 190
Less: Interest 10 15
Earnings / Profit before Tax (PBT) 140 175
Less: Tax 40 70
Earnings / Profit after Tax (PAT) / Bottomline 100 105
Using a P&L statement for decisions
Analysis over a period
Yearly
Half yearly
Quarterly
Comparison with Budgets
Variance
Comparison with Competitors
Topline
Bottomline
Operating Profit
What could a falling Gross Profit Margin mean?
Using a P&L statement for decisions
Key Ratios
Gross Profit Margin = (Gross Profit / Sales)
Pricing / Volumes
Direct Expenses
Operation Profit Margin = (EBITDA / Sales)
Indirect or Operating Expenses
Net Profit Margin = (Net Profit / Sales)
Interest, Taxes, One Time charges
Earnings Per Share (EPS) = (Net Profit / No. of shares)
The shareholders / owners pie
Topline
Bottomline
Operating Profit
What concerns the shareholders the most?
Learning Finance by Doing
Learning by Doing – Simulation driven
Extensive interactive content around key concepts
Practice what you learn
Ask as many questions, clarify doubts and interact
with facilitators
Complete Help and Support available
A Gift for you
Profit and Loss – interactive presentation from the
course – exclusively for you – Click Here
Also, sign up for the FREE simulation trial – Click
Here
Thank You
Key Terms revisited
Matching
Top line
Bottom line
Operating Profit / EBITDA
Depreciation / Amortisation
Earnings Per Share