Brief description of a vital financial tool

1. The art of costing
Profit and Loss (P&L)
Tiago Lopes, Industrial Engineer/Executive MBA, May 2014
A personal view into tools and
methodologies

2. Profit and Loss account (P&L)
• An income statement (US English) or profit and loss account
(UK English)
• Is one of the financial statements of a company and shows the
company’s revenues and expenses during a particular period.
• It indicates how the revenues are transformed into the net
income
• It displays the revenues recognized for a specific period, and
the cost and expenses charged against these revenues
• The purpose of the income statement is to show managers
and investors whether the company made or lost money
during the period being reported
- From Wikipedia, the free encyclopedia

3. Company’s mission
• Any company must have objectives and a mission
for its existence:
– Profit, charity, regional development, promotion of a
technology, introduce new services, etc.
• Once understood the objectives, aligned by the
mission, it is possible to define milestones and pilot
the company
Resources management
to achieve the goal
fulfilling the mission

4. 4
Resources Management
E.g. Making apple preserve
We need
HR Ingredients Instructions Equipments Facilities
And as result we’ll have
apple preserve waste
+ ++ +
+

5. • Money would be the primordial resource allowing to start a
project and keep it running
A company’s sustainability
Financer
Shareholder
Management
Operations
Product
Sales
ResultsOpportunities
Risk

6. • Sales $$$$$
• Cost of supplies -
• Direct Labor -
» Gross Margin $$$$
• Operational costs -
• Indirect Labor -
» Variable Margin $$$
• Amortizations / Depreciations -
• Financial costs/results -
» Margin before taxes $$
• Taxes -
• Payment of dividends -
» Profit (+/-) $
Profit and Loss statement

7. Other more specific examples
Internet random images

8. •Recycling to work on waste management
•Continuous improvement to work on the process
•Technical productivity to apply on to the product or recipe
•Investments to apply in HR or production means
Or other projects
P&L as a continuous improvement tool

9. Conclusion
Dear readers,
This is a basic presentation and for sure there are
other representations and layouts – as my goal is to
introduce the concept and the easiness of reading
would mark you more than the technical complexity
so that you retain the essential on the theme
As always, your feedback would be appreciated as it is
the way to improve
Best regards,
Tiago

10. Who am I?
• I’m an Industrial Engineer and exec. MBA
• Experienced in
– Management: Plant Management, Business management,
Project Management, VA/VE and other special projects
– Operations: Supply chain, Industrial footpath & Green field
operations, Lean process installation & Ergonomics, Lean 6
Sigma continuous improvement
– Finance: P&L, Cost calculation, Price target strategies
– International footpath,
– Passionate for sci-fi and strategy