If you want to understand the financial health of a business, two key reports are essential: the balance sheet and the profit and loss (P&L) statement. While both offer insights into a company’s financial standing, they do so from different angles.
Investors, lenders, and business owners rely on these statements to make sound decisions about where to put their money.
This article will break down the balance sheet and P&L statement, highlighting the differences between the two, the key components of each, and how they’re used in practice. We’ll also explore important metrics and ratios that can be derived from these reports.
By the end, you’ll have a solid understanding of how both the balance sheet and profit and loss work together to paint a picture of a company’s overall financial well-being.
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