Profit & Loss

Profit and loss are fundamental concepts in business that measure the financial performance of a company over a specific period. Profit occurs when a company’s total revenue exceeds its total expenses. It indicates the success of a business in generating more income than it spends and is often the primary objective for most businesses. Companies typically use profit as a measure of efficiency and a benchmark for growth and development.

Profit & Loss ©2025 Eric Hatheway

On the other hand, a loss is the opposite, occurring when expenses surpass revenues. This may indicate inefficiencies, poor sales, or unexpected costs, and can significantly impact a business’s viability. Consistent losses may lead to financial difficulties, necessitating strategic changes or restructuring to return to profitability. Both profit and loss are crucial for analyzing a company’s financial health and making informed business decisions.