Reading a P&L
Walk a profit-and-loss statement from revenue down to net income.
In your head, jot if needed · no calculator why?
Opens at level 6.
Lesson and untimed practice
Read the full lesson and try each skill without a clock. About 3 minutes to read.
skills · practice stats
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Gross profit not tried yet
worked example
Monthly revenue is $78,000 and cost of services is $52,000. What is gross profit?
Answer: $26,000.00
- Gross profit = revenue − cost of services = $78,000 − $52,000 = $26,000.
- It's the first subtotal, not the final profit.
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Operating profit not tried yet
worked example
Gross profit is $11,500 and operating expenses are $5,500. What is operating profit? (Use a minus sign for a loss.)
Answer: $6,000.00
- Operating profit = gross profit − operating expenses = $11,500 − $5,500 = $6,000.
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Down to net income not tried yet
worked example
Revenue is $58,700, cost of goods sold is $10,400, operating expenses are $25,200, interest expense is $1,600, and income-tax expense is $4,200. What is net income?
Answer: $17,300.00
- Gross profit = $58,700 − $10,400 = $48,300.
- Operating profit = $48,300 − $25,200 = $23,100.
- Pretax income = $23,100 − $1,600 = $21,500.
- Net income = $21,500 − $4,200 = $17,300.
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Name that subtotal not tried yet
worked example
Gross profit $70,000 minus operating expenses $38,000 = $32,000. What is $32,000 called on a P&L?
- Net income
- Operating profit
- Gross profit
- Pretax income
Answer: Operating profit
- The P&L steps down: net revenue → gross profit → operating profit → pretax income → net income.
- Gross profit minus operating expenses is operating profit.
rest ladder
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