Profit and Loss Statement is one of the key financial reports which summarizes the business revenues, expenses, and net income over a specified period of time.

Also known as the Income Statement, this financial report shows how profitable business operations are. The key elements in the Profit and Loss Statement are:

• Revenues
• Direct costs of revenues
• Expenses
• Net income

The fundamental goal for every business is to generate a level of revenues while controlling the direct costs and expenses associated with its operations for a positive net income. In this case, the owners are rewarded with dividend distributions and/or increase in their equity through retained earnings. When valuing a small business for sale, Profit and Loss Statements may require adjustment through recasting.