High revenue looks impressive, but is the company actually making money, or is it just for show? To find out, you need to understand the Profit and Loss (P&L) Statement.
First, we look at revenue. Is sales growing consistently? If a business is not increasing its sales, long-term growth becomes difficult.
Next, we analyse the expenses. Are costs under control, or are they eating into the company’s profits?
Finally, and most importantly, we focus on net profit. Is it growing steadily year after year? This is one of the clearest signs of a healthy and profitable company.
The P&L statement tells the real story behind the numbers. It helps you understand whether a company is only showing high revenue or genuinely building a sustainable and profitable business.
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