How to analyze the profit and loss account

Today we teach you how analyze a profit and loss account of a company to know if the company is profitable and what net profit margin it has.

Accounting documents, far from being a mere formality, are those that put the truth before our eyes and allow those responsible to make the necessary decisions to lead the business towards business success.

In the EIP International Business School we have the Master of Financial Management where you will get all the necessary tools to analyze the accounting of a company and obtain the maximum performance from it.

Analyze the profit and loss account: what to take into account

The profit and loss account is one of the simplest, not only to create but also to analyze. This accounting document shows us what our expenses and purchases have been in relation to our profits and sales. The interesting It is not so much knowing whether the company makes or loses money, but why it does so..

In addition, we must know that companies that want to invest in our company will ask us for this document to know if the company is profitable.

Other information of interest that we can obtain

We already know what is important, how much our company earns, how much it spends and what profit we obtain. However, other data can be obtained from the profit and loss account that can be very useful. The best example of this is the company's net profit margin. It is obtained as a percentage and tells us How much profit does the company obtain for every €100 of profit?.

He net margin It is a very relative figure that, when analyzing the profit and loss statement, must be treated in context. And this margin can vary very easily depending on different factors. The professional sector in which the activity is carried out can be a key factor but also the company's recent investments, among others.

Another important piece of information that we can obtain is what English speakers know as EBITDA (Earnings before interest, taxes, depreciations and amortizations) and in Spanish it has a name as simple as operative result. We obtain this information by analyzing the results of the year without taking into account taxes or financing operations or those that may be exceptional.

Do you want to specialize in Financial Management?

In it Master of Financial Management of the EIP International Business School You will learn how to carry out this exercise and all those that are carried out in the company environment.

The Master in Financial Management will train you to meet the accounting, tax and commercial obligations to which all companies and professionals are subject that carry out their activity within the Spanish national territory.