Module 3   Fundamental Analysis (Video Series)Chapter 4

Understanding the P&L statement

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4.1 -Overview of the financial statements

In the previous video, we analyzed a company’s annual report. The other important statement that companies publish is their Profit and Loss statement (P&L). A P&L statement has the revenues, expenses, taxes, and the profits or losses of a company for a given period. Analyzing a P&L statement will provide you with a sense of the company’s financial position.

In this video, we look at the components of a P&L statement and analyze them.

In the following video, we will learn about the Balance Sheet.

We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.

Key takeaways from this chapter

  1. The financial statement provides information and conveys the financial position of the company.
  2. A complete set of financial statements include the Profit & Loss Account, Balance Sheet and Cash Flow Statement.
  3. A fundamental Analyst is a financial statement user, and he needs to know what the maker of the financial statements states.
  4. The profit and loss statement gives the company’s profitability for the year under consideration.
  5. The P&L statement is an estimate, as the company can revise the numbers later. Also, by default, companies publish data for the current year and the previous year, side by side.
  6. The revenue side of the P&L is also called the top line of the company.
  7. Revenue from operations is the primary source of revenue for the company.
  8. Other operating income includes revenue incidental to the business.
  9. The other income includes revenue from non-operating sources.
  10. The revenue from operations (net of duty), other operating income, and other incomes give the ‘Net Revenue from Operations.
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