The Profit and Loss statement
The Profit and Loss statement is commonly known as the P&L Statement, Income Statement, Statement of Operations, or Statement of Earnings. It reveals what has occurred over an interval and gives data on revenue, expenses, and net income. The P&L statement reports information on:
By referencing the P&L statement of Amara Raja Batteries Limited (ARBL), I can demonstrate how to interpret the financial statements. Examining each line item closely should help to get an in-depth understanding.
– – The Top Line of the company (Revenue)
Analysts often mention the top line when discussing a company – they are referring to its revenue figure listed on its P&L statement. This is the first entry displayed in the Profit and Loss report.
Before we begin analysing the income portion, let us pay attention to several points mentioned in the title of the P&L report:
The header clearly states:
Sales of Products are basically the first line item on the revenue side.
We are dealing with a batteries producer, and their sales for FY14 are estimated at Rs.38,041,270,000/- or around Rs.3,804 Crore. This is a significant jump from FY13’s Rs.3,294 Cr in battery sales.
I would like to point out that all the figures will be expressed in Rupee Crore for ease of understanding.
The following line item is the excise duty, a payment of Rs.400 Crs made to the government, which will be deducted from the company’s income.
After considering the excise duty, ARBL’s revenue for FY14 was Rs.3403 Crs, up from FY13’s Rs.2943 Crs.
Apart from product sales, the business additionally obtained revenue from services. This may have been through annual battery maintenance, which earned Rs.30.9Crs in FY14.
The company also reports “other operating revenues” at Rs.2.1crs which may be from the sale of products or services incidental to its primary operations.
Finally, the revenue from the Sale of products + Sale of services + Other operating revenues sums up to give the company’s total operating revenue.
In total, the company’s operating revenue for FY14 is Rs.3436 Crs, and FY13 is Rs.2959 Crs. Note 17, associated with ” Net Revenue from Operations” will give further insight into this matter.
We discussed notes and schedules of the financial statement in the previous chapter, so let’s recall that.
This note contains information about 17. The following illustration provides the details.
The notes provide a thorough analysis of the breakdown of revenues from operations, excluding other income information. Section ‘a’ of the particulars discusses sales of products specifically.
When you look at the P&L, apart from operating revenue, ARBL also reports ‘Other Income’ of Rs.45.5 Crs. Note 18 outlines the details of this income source.
We can observe that the other income incorporates money which is not related to the primary operations of the company. Interest on bank deposits, dividends, insurance claims, and royalty income all make up this portion of the money. One should expect it to constitute merely a minor amount of the overall income. A sizeable ‘other income’ will likely raise suspicions, thus prompting further examination.
The total revenue for FY14 amounts to Rs.3482Crs, which has been obtained by summing up the income generated from operations (Rs.3436 Crs) and other sources (Rs.45 Crs).