Next video:
Loading the player...

Balance sheets and profit and loss statements provide investors with crucial analysis. They contain similar information, but they have some important differences, as well. Basically, the balance sheet shows how much a company is worth, while the P&L statement reveals if a company is profitable or not.

The balance sheet sums up a company’s financial position for one specific point in time. The P&L statement shows revenues and expenses during a set period of time.

The P&L statement provides net income, and is more focused than either the cash flow statement or the balance sheet. It shows if a company is in the red or the black.

Balance sheets balance out three major accounts: assets, liabilities and shareholders’ equity. Balance sheets also reveal what a company owns and owes, as well as the full value of long-term investments and debts.

The P&L statement requires accountants to add a company’s revenue on one portion and its expenses on another. Expenses are subtracted from revenue to come up with a profit or loss. The balance sheet’s basic formula is assets equal liabilities plus owners’ equity.

  1. No results found.
Related Articles
  1. Investing

    Understanding the P&L Statement

    A company’s profit and loss statement, also called its income statement, summarizes its income and expenses for a quarter or year.
  2. Trading

    Calculating Profits And Losses Of Your Currency Trades

    The forex is a risky market, and traders must always remain alert about their trade positions. Learn how to keep on top of your currency trades.
  3. Investing

    Reading the Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  4. Investing

    What's a P&L Statement?

    A profit and loss statement, also called the income statement, is a financial statement that companies use to report their income and expenses for a quarter or a year.
  5. Investing

    5 Tips For Reading A Balance Sheet

    If you know how to read it, the balance sheet provides valuable information on a potential investment.
  6. Investing

    Outstanding Shares

    Learn more about this important number found on a company's balance sheet.
  7. Investing

    Retained Earnings

    Learn more about this calculation and why companies include it on the balance sheet.
  8. Insights

    How Will the Fed Reduce its Balance Sheet?

    After a 6 year policy of quantitative easing the Fed now has to address the resulting $4.5 trillion balance sheet as it begins to tighten policy.
  9. Investing

    What are Financial Statements?

    Financial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...
Hot Definitions
  1. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  2. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  3. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  4. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  5. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  6. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
Trading Center