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Guide To Analysing Companies, Fifth Edition by Bob Vause

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6 Measuring profitability

T HIS CHAPTER IS CONCERNED with the analysis of company profitability. It starts by concentrating on the data contained within the income statement profit and loss account and then broadens out to include the balance sheet and other sources of financial data and relevant information.

What is profit?

One definition of profit is that it represents the surplus of income over expenditure. In accounting, where income is greater than expenditure a profit is produced, and where expenditure is greater than income a loss results. Hence in the UK the statement dealing with revenue and expenditure was termed the profit and loss account (P&L). Income statement is the name now used in all countries.

Defining and measuring ...

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