Understanding profit and loss statements: Simple guide for Indian retail investors

Business Upturn

2 days ago

For any Indian retail investor, the profit and loss (P&L) statement is like the scoreboard of a company. It tells you whether the business is making money or losing it.
If you want to know how a company like Infosys, Tata Motors, or Marico earns revenue and manages expenses, reading its P&L statement is essential. What is a profit and loss statement?
A profit and loss statement, also called an income statement, shows a company's revenues, costs, and profits over a particular period—usually a quarter or a year.
It answers two main questions:
How much money did the company make?
How much did it spend to make that money? 5 key sections in a company's P&L statement (with Indian examples)
Revenue / Sales:This is the total money earned from selling products or services.
Example: Titan Company's revenue from jewellery and watches.
Cost of Goods Sold (COGS):Direct costs of producing goods sold.
Example: Raw material costs for Tata Steel or manufacturing expenses for Hero MotoCorp.
Gross Profit:Revenue minus COGS.
It shows how efficiently the company is producing its goods.
Operating Expenses:This includes salaries, marketing, rent, and other daily running costs.
Example: IT services companies like TCS and Wipro show high employee expenses here.
Net Profit / Bottom Line:After subtracting taxes, interest, and other costs, the final profit figure remains.This is what investors track closely every quarter.
Example: HDFC Bank's quarterly net profit often makes headlines. Key ratios you can calculate from the P&L statement Net Profit Margin: (Net Profit / Revenue) x 100. Shows how much profit the company makes per rupee of sales.
Operating Margin: Focuses on profit from core operations before interest and taxes.
Earnings Per Share (EPS): Net Profit divided by the total number of shares. Example: Always check the EPS growth for companies like Infosys or Maruti Suzuki. Why should Indian investors track the P&L? To check revenue and profit growth over quarters
To compare operating margins across competitors (Example: FMCG firms like Hindustan Unilever vs ITC)
To monitor expense control and profitability Final takeaway
For retail investors in India, the P&L statement offers a quick reality check. Before you buy any stock, spend 5 minutes checking the company's revenue trend, expense pattern, and profit growth.
Next time you hear about a company announcing quarterly results, open its P&L statement and track these metrics.
Ahmedabad Plane Crash
Aditya Bhagchandani serves as the Senior Editor and Writer at Business Upturn, where he leads coverage across the Business, Finance, Corporate, and Stock Market segments. With a keen eye for detail and a commitment to journalistic integrity, he not only contributes insightful articles but also oversees editorial direction for the reporting team.