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The profit and loss account is a critical tool for businesses. It provides an indication of the health of a business in relation to its financial performance, and is not only used for analysis but -- in conjunction with other financial documents -- for strategic planning also. One year's profit and loss account provides a snapshot of performance over a short period of time, but it is when comparisons can be made across years that it becomes a particularly significant forecasting and budgeting tool.
This film looks at the profit and loss account. The University of Westminster's Senior Lecturer, Jonathan Pike takes us through the different components of financial activity and analysis arising from profit and loss accounts, including total turnover, gross profit, operating profit, interest and tax, dividends and retained profit. A number of terms are clearly defined and explained, using simple generic examples, making this resource ideal for students of business and accounting at GCSE and FE level.