Magnitude is a full service digital marketing agency. We offer services in profit/loss analysis, paid search, SEO, SMM, and review monitoring. However, we’re more than media and marketing. Our strategic business development team led by Tony Ford can help identify improvements at the root of your customer’s experience.
What is Profit/Loss Analysis?
A profit and loss analysis report is “a financial statement that summarizes the revenues, costs, and expenses incurred during a specific period.” This report usually covers a fiscal quarter or year. Moreover, when it comes to financial statement analysis, this report is one of the primary documents in the accounting system.
Visualizing a profit/loss analysis report
First, the profit and loss report starts with the revenue, from which you subtract your business expenses to reach the net profit. Second, the essential elements of the profit and loss analysis are always the same and include the cost of goods sold, gross profit, operating expenses and income, and other costs and revenue. Next, indicate income before taxes, income taxes, net income, and earnings per share.
How to write a profit and loss analysis?
There are many profit and loss report templates available, but it’s best to tailor the statement to your business. Of course, a management company can create a profit/loss analysis for you in no time. If you choose to work on your own, here are a few helpful tips on how to write the report.
Keep track of your revenue
When customers buy your products or services, that is your revenue. Hence, keeping track of the numbers is an important habit that will help you create your profit and loss report.
Figure out your cost of goods sold
Cost of sales describes the expenses that depend on the amount of business you are doing. For example, this includes your inventory, materials, and extra staff wages. This number is the one you will add later to your profit and loss analysis.
What is your gross profit?
That’s where the first two numbers come to play. When you subtract your cost of goods sold from your revenue, this is your gross profit.
Calculate your overhead
Here we are talking about fixed expenses that you have to run your company. Hence, they don’t usually change over the year or with an increase in sales. For example, consider things like rent, ads, wages, and equipment.
What is your operating income?
Subtract the cost of your overhead from your gross profit to get operating income.
Do you have other income or expenses?
Everything that goes here is not related to your business operation. However, such expenses as interest on loans or profits in the form of dividends should be mentioned in this section. Add the profits and subtract the expenses from your operating income. What’s left?
Your net profit
To sum up, you have done all the above calculations to reach this number. This is your bottom line. After paying all of your expenses, it is this number that will show if your business has loss or profit.
How can we help you write your profit/loss analysis?
Overall, writing a profit/loss analysis is very time-consuming. That’s why Magnitude works to save you time and money. Besides, we’re business professionals that own a portfolio of our own companies. We want to speak with you about writing your profit/loss analysis. Schedule your free brand consultation today.
If you would like to learn more about profit and loss analysis, read these helpful articles.
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