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What to Look for on Profit and Loss Statements When Investing This important little statement can offer significant insights into a company's performance.

By Phil Town

Opinions expressed by Entrepreneur contributors are their own.

Profit and loss statements are a great measure of a company's performance -- though when reviewing a P&L statement, Entrepreneur Network partner Phil Town recommends looking out for a few factors, so you are getting a complete idea of a company's financial condition.

A P&L statement shows the company's revenue, expenses and net income for the latest quarter. Revenue and earnings per share -- which are always on the statement -- are some of the most significant values. Investors are always focusing a majority of their attention on these values. Though to get a full picture of how a company is performing, the entirety of the statement should be analyzed.

Town notes that the statement can be confusing in that value and price are often going in opposite directions. Moreover, P&L statements are the favorite of clever accountants, who will often look to make any possible manipulations to make a P&L statement look presentable to investors and fund managers.

Click the video to learn more about profit and loss statements.

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Phil Town is an Investment Advisor, Hedge Fund Manager, 2x New York Times Best-Selling Author of Rule #1 & Payback Time, and Ex-Grand Canyon River Rafting Guide. Rule #1 Investing is Warren Buffett style investing, teaching you how to buy businesses on sale, with little risk and 15 percent returns. In fact, Rule #1 investing is practically immune to the ups and downs of the stock market.

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