Just came across an article about P&L Statement that I think is worth knowing for anyone interested in investing or tracking a company’s performance.

Actually, P&L—also known as a Profit and Loss Statement—is easier than you think. The basic formula is simply: total revenue minus total expenses equals profit or loss. That’s it.

What’s interesting, though, is that it’s not just about looking at the final numbers—you need to understand where the profit comes from. For example, gross profit (Gross Profit) indicates by how much the product price is higher than the cost. Operating profit (Operating Profit) tells you whether the business is being managed well. And net income (Net Income) is the profit that remains after deducting all expenses.

There are 2 types of P&L. The first is the Report Form, which presents the information in a report format and is easier to read. The second is the Account Form, which shows a T-shape layout with expenses on the left and revenue on the right, making it clearer.

Why do you need to know P&L? Because it helps you see the company’s financial performance, shows where the income comes from, what expenses there are, and most importantly, it helps you plan strategy more effectively.

When reading a P&L, you should first check whether it’s a profit or a loss statement (profit if revenue is greater than expenses; loss if it’s less). Then look at which part the revenue comes from and what line items the expenses include. Only by reviewing the details like this can you truly understand the overall picture of the business.

When it comes to investing, you shouldn’t rely on P&L alone. You also need to consider other factors, such as the nature of the business, the quality of the management team, and technical information that supports growth. All of these combined help paint a clearer picture of whether the business is truly worth investing in.