Upload
learning-infinite
View
251
Download
1
Embed Size (px)
DESCRIPTION
Demystifying the Profit and Loss statement - Key extracts from the webinar conducted by Vipin Khandel, Founder and CEO of Learning Infinite on using the profit and loss statement to understand and assess business performance.
Citation preview
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