Glossary · Reading the business
Profit and Loss Statement
In short
A financial report summarizing a business's revenues, expenses, and net profit or loss over a specific period. Buyers care because it’s a primary tool to understand historical profitability and the business’s ability to generate cash.
What it means in a deal
This is one of the most critical documents during due diligence. You'll analyze several years of P&Ls, often with add-backs, to determine the true owner earnings and project future performance. Verify the P&L against tax returns and bank statements to ensure accuracy.
Related terms
Common questions about Profit and Loss Statement
- What is a 'personal financial statement' and why is it needed for an SBA 7(a) loan?
- What does a 'personal financial statement' entail and why is it needed for an SBA 7(a) loan?
- What if my personal financial statement shows low liquidity, but I have a strong credit score and business plan?
- What happens if my personal financial statement shows low liquidity, but I have a strong credit score and business plan?
- Can a non-profit organization with a for-profit subsidiary be eligible for a 7(a) loan?
- What if my personal financial statement shows low liquid assets?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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