How to Read a Financial Statement II

The Profit and Loss Account summarizes a business’s performance over a period (usually a year).
Sales (turnover): total sales revenues.

Cost of Sales: production overheads, raw materials, employees, product development, changes in stock levels, depreciation.

Gross Profit = Sales – Cost of Sales.

Operating Costs: costs of administration, distribution, marketing.

Operating Profit = Gross Profit – Operating Costs. (also referred to as profit before interest and tax, PBIT).

Profit Before Tax = Operating Profit – Profit
(+ Loss) on Sales of Fixed Assets – Net Interest Payable.