Personal Money Management 101
How to Read a Financial Statement : Profit and Loss Account
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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