Your Income Statement (P&L)

14 min
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  • Income Statement Explained
    Ken Burke 7 min
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    Your income statement (or P&L) tells the entire financial story of your business at a glance. The income statement is also an industry-standard statement, so it's readily understood by banks or investors. The story it tells? The story of how realistic your business is based on your forecasts, how many expenses you have, your product, sales & marketing costs, as well as your staffing projections.

The income statement, or P&L, is the financial report investors will scrutinize the most – and with good reason: it’s where all your projections and calculations are summarized to tell the story, in numbers, of how your business will make money. In this learning stream, we’ll examine the five components of the income statement and how they relate to the models and projections you’ve already built, and explore what the summary numbers reveal about your business’ potential for growth through such calculations as net revenue, gross margin and operating margin. Using a companion spreadsheet in tandem with the other exercises in this learning path, you’ll develop a P&L that’s accurate and convincing.

You will learn:

  • Why do investors care about the P&L?
  • What red flags are investors looking for when they scrutinize the numbers?
  • What adjustments should I include to arrive at a realistic net revenue?
  • Why is gross margin so important?
  • How can I identify an appropriate gross margin target for my business?
  • What should I include as operating expenses?
  • What is the difference between gross margin and operating margin?
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