FINANCIAL VOCABULARY: Profit and Loss Report and Balance Sheet

A 𝗣𝗿𝗼𝗳𝗶𝘁 𝗮𝗻𝗱 𝗟𝗼𝘀𝘀 𝗥𝗲𝗽𝗼𝗿𝘁 is a financial statement that summarizes the income and expenses incurred by a business during a specified period of time. It is a great tool to check quarterly to analyze growth and see how your business has changed. If you are applying for a loan, your lender may ask for a current Profit and Loss. Similarly, your CPA or bookkeeper will check this report periodically to see how things are going and to identify any red flags or potential errors.

A 𝗕𝗮𝗹𝗮𝗻𝗰𝗲 𝗦𝗵𝗲𝗲𝘁 is a financial summary of a business at any point in time, calculated by subtracting all of the company's liabilities and shareholder equity from its total assets. A balance sheet is often used by lenders to gauge the company's health. This gives them an idea how much risk a company carries, how liquid its assets are, and how likely it is that the company will remain solvent.

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