Analyzing a P&L statement involves examining various ratios and metrics to gain insights into the business's financial performance:
Gross Margin Ratio This ratio is calculated by dividing gross profit by total revenue. It indicates the percentage of revenue that exceeds the COGS, reflecting the efficiency in production.
Operating Margin Ratio Calculated by dividing operating income by total revenue, this ratio shows the percentage of revenue left after covering operating expenses.
Net Profit Margin Ratio This ratio is obtained by dividing net income by total revenue. It provides a comprehensive view of overall profitability, considering all expenses.