Income statement (P&L)

Definition

The statement of what a business earned and spent over a period, ending in profit or loss, and the first document a buyer reads on any target.

Why It Matters

It is where the asking price comes from, because the multiple is applied to earnings this statement reports, so every line a seller has understated or left out moves the price. Read it against the tax return rather than on its own: the version prepared for a sale and the version filed with the IRS are both true statements about the same year, and where they disagree is the most useful question a buyer can ask.