What is the significance of the income statement for my company?
February 21, 2024 | 40,00 EUR | answered by Günther Köhler
Dear tax advisor,
my name is Louis Rapp and I am the owner of a medium-sized company in the construction industry. In recent years, my company has been steadily growing and we have received many orders from various customers. Despite the growth in revenue, I am concerned about the financial health of my company. I have heard that the profit and loss statement plays an important role in the financial management of a company, but I am unsure of its exact significance for my business.
The current state of my company shows that while we generate high revenues, the costs for materials, personnel, and operating expenses are continuously increasing. I fear that we may not be generating enough profit to remain successful in the long term. Additionally, I have difficulties in properly assessing the financial performance of my company and making strategic decisions.
Therefore, my question to you as an experienced tax advisor is: What is the significance of the profit and loss statement for my company and how can it help me better understand the financial situation of my company? Which key figures should I pay special attention to and how can I use the profit and loss statement to identify potential risks early on and take appropriate measures?
I look forward to your expert advice and thank you in advance for your support.
Sincerely,
Louis Rapp
Dear Mr. Rapp,
Thank you for your inquiry and your trust in my expertise as a tax advisor. The profit and loss statement (P&L) is indeed an important part of the financial management of a company and can help you better understand the financial health of your medium-sized construction company.
The P&L shows you how much profit or loss your company has incurred in a specific period of time. It lists all revenues and expenses that have occurred during this period, giving you an overview of the financial situation of your company. By regularly preparing and analyzing the P&L, you can identify early on whether your company is profitable and where potential risks lie.
For your company operating in the construction industry, you should pay particular attention to certain key figures in the P&L. The most important key figures include revenue, costs for materials, personnel, and operating resources, profit before taxes, and net profit. By analyzing these key figures, you can determine whether your revenues are sufficient to cover increasing costs and achieve a reasonable profit.
To identify potential risks early on and take appropriate measures, I recommend regularly preparing and analyzing the P&L. Pay attention to whether your costs are rising faster than your revenues, whether there are liquidity constraints, and whether certain projects are unprofitable. By recognizing risks early on, you can take timely action and make strategic decisions to ensure the financial health of your company.
If you have difficulty assessing the financial performance of your company correctly, I am happy to assist you. I am happy to support you in preparing and analyzing your P&L, explain the key figures to you, and help you identify potential risks and take appropriate measures.
I hope my advice is helpful to you and I am available for any further questions you may have.
Sincerely,
Günther Köhler
