The basic idea
A profit and loss statement summarizes revenue and expenses over a period of time. It helps show whether business activity produced a profit or loss during that period.
What to review
Do not look only at the bottom line.
Revenue trend
Major expense categories
Gross margin where applicable
Operating expense growth
Unusual one-time items
Comparison with prior periods
What it does not tell you
Profit is not the same thing as cash. A business can report profit while still having cash tied up in receivables or facing upcoming payables.