Video: Profit & Loss Statements
📈 Understanding Profit & Loss Statements
This video explains how Profit & Loss (P&L) statements work — a crucial tool for evaluating company performance, analysing financial health, and making informed investment decisions.
💡 How to Get the Most From This Video
- Watch actively: Open a spreadsheet and follow along with example numbers
- Pause when needed: Re-read definitions of revenue, expenses, net income, and cash flow components
- Practice: Try building a simple P&L template yourself to reinforce learning
- Compare real companies: After watching, inspect a real company’s P&L report to see how it matches concepts
🎯 Key Topics Covered
- Revenue vs Expenses: Understanding top-line vs bottom-line
- Gross Profit & Margins: Why cost of goods sold matters
- Operating vs Non-Operating Costs: Differentiating core business performance from one-time items
- Net Income & Earnings: How profits are determined after costs and taxes
- Importance for Investors: How P&L statements support valuation, dividends and long-term performance analysis
Next Steps: Download a sample P&L statement from a publicly listed company and walk through it line-by-line comparing to this video. Practice isolating key metrics like gross margin, operating income, and net profit — this will build your financial literacy and improve investment decisions.
📝 Reflection Questions
- What components of the P&L statement surprised you the most?
- How would you use gross margin or net income data when evaluating a company?
- Have you noticed companies with high revenue but poor profit — what red flags appear?
- Could P&L analysis change your view on stock valuations or dividend sustainability?
Video transcript
This transcript was generated from the video’s published English captions and formatted for readability. Minor transcription errors may remain.
00:00:00 Today we’re going to be setting up a spreadsheet which allows you to monitor your profit or loss which includes of course the income you’re receiving from your shares. So to begin with what we need to do is to actually enter the data or set up the sheet so we actually can enter the data which is going to be relevant to what we’re trying to do. When you first open your Excel, you won’t have all the details I have in my sheet. For example, in my column A, I’ve got all this information listed such as when did I buy the stock, how much did I pay for the stock, and so on. And in my column B or row one, I’ve actually got the ASX code as my title. Now, you don’t have that yet, so why don’t you press the pause button, copy what I’ve got into your Excel spreadsheet, and we can take it from there. Great. Now that you’ve got your Excel spreadsheet set up like mine, what we’re going to do now is to make Excel work for us. So our next task is to set up some equations which would do the summation, multiplication and so on.
00:01:00 automatically. The first cell I’m going to be modifying is going to be cell B5. So if I click into cell B5, I can now go and modify this cell. So what is in cell B5 is going to be our holding period. In other words, how long did we actually hold the stock for? So you can see in cell A3 I’ve got my purchase date and in cell A4 I’ve got my date sold. So if we enter the dates for B3 and B4, we can now use these two dates to calculate what the holding period is going to be. So it’s simply just going to be equals. And it’s it’s going to be our sold date, which is going to be cell B4 minus cell B3. The next sale that may need modification is going to be our brokerage fee. So you may have a fixed brokerage fee or your brokerage fee may be a percentage of your total purchase. So if we look at cell B1, this is going to be where we.
00:02:00 may have an amount which is going to be based on a percentage. If that’s going to be the case, we will need to modify this cell as well. So, all we need to do is just go press equals, take the purchase price, and we’re going to multiply the purchase price with the number of shares and multiply that with whatever percentage they brokerage firm may actually be charging us. So, for example, it could be.1 of a percent as an example. And of course, we will do exactly the same thing for our brokerage fees to sell. So this is going to be equals to and it’s going to be our sell price times the number of shares that we’ve got sold times again with the percentage that our brokerage firm is going to be charging us there equals the next set of sales we’re going to be modifying is going to be our purchase consideration. In other words, how much do we pay for the stocks,.
00:03:00 including the brokerage fees and our net sales receipts, which is going to be how much we actually received after we’ve deducted the brokerage fees from our sales as well with our purchase consideration, which is in cell B14. This is going to be made up of, so we go equals. It’s going to be made up of our purchase price multiplied with the number of shares add to it our brokerage fee for the purchase. And as for our sales receipts, this is again going to be made up of our sales price with the number of shares. This time around, we need to deduct. So minus our brokerage fee to sell. Now that we have both our purchase consideration and our net sales receipts, we can calculate our profit or loss from the trade. So if we come to cell B17, we can set the formula to do the calculation for us. So this is simply just going to be the difference between our sales price or sales.
00:04:00 consideration less our purchase consideration and that’s going to be our profit or loss for the period. Finally, we want to measure what was our return as a percentage. So, this is known as our holding period yield. So, in cell B8, this is going to be our holding period yield. All this is is just going to be the profit or the loss we’ve made divided by our total purchase consideration. And now what we need to do is to adjust for the time that we’re actually holding the stock for. So, we’re going to multiply this by 365 divided by our holding period. Now that we’ve actually created the formulas, we can actually copy these formulas across to the other cells. One way to do this is to click into the cell.
00:05:00 that we want to copy, put our cursor onto the little green box there until it turns black, and we just simply drag this across to the other cells. That formula would automatically copy to the other cells. So, we can do it again for the next set of equations. Again, we can highlight both at the same time. Make sure our cursor turns black and we can drag that across. So by doing so, we can now enter data for not just one stock, but all of the other stocks that we’ve actually got in our portfolio. Let’s test drive our spreadsheet. For argument sake, let’s say I bought BHP. So I’m just entering the ASX code there as a record of what stock I bought. I bought BHP let’s say on the 2nd of January 2018 and I sold the stock on the 29th of June.
00:06:00 2018. That means I held this this particular stock for 178 days. Now let’s say we paid $29.50 per share for the stock and we sold it for $34.7 per share. And for argument sake, let’s say I bought a,000 shares. Then we can work out that our total purchase consideration is $29,529.50, which includes our brokerage fee of $29.50. Our sales receipt is uh $34,35, which also has our brokerage fees deducted out of it. So that means then we’ve made a profit in that 6 months of $45,000 or an annualized return of 31%. Thank you for listening to our video. I hope you enjoyed it. Happy learning.
