[GTM glossary](/glossary.txt) Profit and loss (P&L) GTM Strategy & SaaS Metrics # Profit and loss (P&L) Also known as: P&L statement, income statement In short A profit and loss (P&L) statement, also called an income statement, summarizes a company's revenue, costs, and expenses over a period, such as a quarter or year. The result at the bottom is net profit or net loss. GTM leaders use the P&L to see how revenue and spend connect, and often own a line or budget within it. ## What a P&L contains * **Revenue:** Income from sales, often split by product or segment. * **Cost of goods sold:** Direct costs of delivering the product. Revenue minus this gives gross profit. * **Operating expenses:** Sales, marketing, research, and administration costs. * **Operating profit:** Gross profit minus operating expenses. * **Net profit:** What remains after interest, taxes, and other items. --- ## Reading a P&L as a GTM leader ### Look at margins, not only revenue Say revenue grows while gross margin falls. Heavy discounting or higher delivery cost may be the cause, so growth is less valuable than it looks. ### Check sales and marketing as a share of revenue This shows how much of each dollar goes into acquiring customers and whether that share is stable. ### Compare periods Compare with prior quarters and plan. Variances show where spending or revenue moved. --- ## P&L vs. other statements The P&L shows performance over time. The balance sheet shows assets and liabilities at a point in time. The cash flow statement shows cash moving in and out. A company can be profitable on the P&L and still short of cash, so they work together. --- ## Common mistakes * **Confusing profit with cash:** Timing of payments and revenue recognition can differ. * **Ignoring revenue recognition:** Subscription revenue is usually recognized over the contract term, not when billed. Check how your finance team reports it. * **Treating sales spend only as a cost:** Acquisition spend produces future revenue, so judge it alongside retention and payback. --- ## Profit and loss (P&L) FAQs **What is a profit and loss (P&L) statement?** A P&L statement summarizes revenue, costs, and expenses over a set period and ends with net profit or loss. It is also called an income statement and shows how well a company turns sales into profit. **What is the difference between a P&L and a balance sheet?** A P&L covers performance over a period, showing revenue, expenses, and profit. A balance sheet is a snapshot at one date, listing assets, liabilities, and equity. Together with the cash flow statement they describe a company's finances. **Why should sales and marketing leaders understand the P&L?** Sales and marketing costs are major operating expenses on the P&L. Understanding margins, spend as a share of revenue, and variances helps leaders justify budgets, explain results, and align plans with company profitability goals. **Can a company be profitable on its P&L and still run out of cash?** Yes. The P&L records revenue and expenses when earned or incurred, not when cash moves. Late customer payments, large purchases, or upfront costs can leave a profitable company short of cash, which is why cash flow is tracked separately. Share term --- ## More related phrases * [Business-to-government](/glossary/business-to-government.txt) * [Digital transformation (DTX)](/glossary/digital-transformation.txt) * [GTM](/glossary/gtm.txt) ## Similar phrases * [Customer acquisition cost (CAC)](/glossary/customer-acquisition-cost.txt) Customer acquisition cost (CAC) is the total sales and marketing spend needed to win one new customer, usually measured over a set period. * [Revenue forecasting](/glossary/revenue-forecasting.txt) Revenue forecasting predicts how much revenue a company will earn in a future period, using pipeline, historical conversion data, and recurring revenue to guide hiring and spending decisions. * [Gross margin](/glossary/gross-margin.txt) Gross margin is the percentage of revenue left after subtracting the direct costs of delivering your product or service, and it shows how much is available to cover sales, marketing, and other overhead. * [Bookings](/glossary/bookings.txt) Bookings is the total value of customer contracts signed in a period, counted at signature regardless of when revenue is recognized or cash arrives. * [Business-to-business (B2B)](/glossary/business-to-business.txt) Business-to-business (B2B) describes companies that sell products or services to other organizations rather than to individual consumers.