Profit & Loss (P&L) Statements

A Profit & Loss Statement (P&L)—also known as an income statement—is a financial document that summarizes the revenue, costs, and expenses incurred by a startup over a specific period, usually a fiscal year. When referring to the last five years, this means providing a historical overview of how the startup has performed financially over that time.

Breakdown of a Profit & Loss Statement for a Startup:

Revenue (Sales)
o Income generated from selling products/services.
o Can be divided into different revenue streams.
Cost of Goods Sold (COGS)
o Direct costs associated with producing goods/services (e.g., manufacturing costs, raw materials, or direct labor).
Gross Profit
o Calculated as Revenue – COGS.
o Shows the core profitability before operational expenses.
Operating Expenses
o Includes costs like rent, salaries, marketing, utilities, and administrative costs.
Operating Profit (EBIT – Earnings Before Interest & Taxes)
o Gross Profit – Operating Expenses.
o Shows how much profit is generated from regular business activities.
Other Income & Expenses
o Includes items like investment income, depreciation, and interest payments on loans.
Net Profit (or Loss)
o Total Revenue – Total Expenses.
o The final bottom line showing whether the company made a profit or a loss.

Why Historical P&L Statements Matter for a Startup:

Investor Evaluation: Investors use these statements to assess financial health, profitability trends, and future growth potential.
ecision Making: Helps founders make strategic decisions regarding pricing, budgeting, and cost-cutting.
Funding & Loans: Lenders may request these to evaluate creditworthiness.
Tax Reporting & Compliance: Used for tax filings and regulatory reporting.

For a startup, these statements are crucial in understanding financial sustainability, forecasting growth, and making informed decisions.

Written by Swedish Ventures, Rolf Olsson. Remarks to this article could be sent to glossary@swedishventures.se

ASO: DD-03-01