How to Read a Profit and Loss Statement Before Buying a Business Understanding Financial Statements: Profit and Loss Report Understanding Financial Statements: Profit and Loss Report Make smarter decisions before you buy a business. Why Financial Statements Matter When Buying a Business When you're looking to buy a business, one of the most important documents you'll encounter is the Profit and Loss Statement (P&L) , also known as the income statement. It tells you how much money the business makes — and spends — over a specific period. Understanding the P&L helps you answer questions like: Is the business actually profitable? Are expenses under control? Are sales growing or shrinking? How stable is the cash flow? What’s Inside a Profit and Loss Statement? A typical P&L report includes the following key components: Revenue: Total ...
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