Chemical Industry_Financial Profit and Loss
Analysis (P&L)
1. Analysis background introduction
This case comes from a leading agricultural
technology and agricultural products production enterprise in China. Its main
business covers the planting, processing, sales and technical services of
agricultural products. With continuous technological innovation and product
upgrading, it has quickly gained a high market share in domestic and foreign
markets.Against the background of changes in the market environment and
increasing competition in the industry, the financial performance of
enterprises, especially the income statement, has become the focus of
management's attention.
Recently, the finance department released
the latest income statement, showing the company's current operating
performance and details of costs and expenses. In order to better understand
the key factors affecting the company's profit margin and conduct a
comprehensive financial health assessment, the company decided to find out the
main driving factors of cost and expense through in-depth analysis of the
income statement, optimize resource allocation and cost control strategies, so
as to improve overall profitability.
2. Statement of key issues
The main goals of this data analysis
include:
Evaluate the business performance:Analyze the company's current profitability and its fluctuation
trend through the income, cost and profit items in the income statement.
Identify cost drivers:In-depth analysis of sales costs, operating expenses, research and
development expenses and management expenses to understand their impact on the
profit margin.
Profit margin improvement strategy:Based on the analysis results, put forward targeted cost control
measures and profit optimization suggestions to improve future profit margins.
3. Analyze the plan
The income statement (P&L) is a
financial statement, starting from income, minus costs and expenses, resulting
inNet income during the specified period, that is, the profitability of the
company, summarizes the income, costs and expenses of a specific company during
the specified period.There are certain differences in the definition of the
income statement and the profit statement.. The income statement mainly reflects the business
income and expenditure of the enterprise in a certain period of time, but does
not include the impact of investment activities and financial financing
activities.
3.1 This standard income statement
(P&L) is composed of the following items, and the data source is the
financial system.
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Serial number
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Project name
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Computational logic
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Analysis angle
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1
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Net Revenue (Net Revenue)
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Net income = total income - return -
discount - sales limit
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Net income is the total sales income of
the company after deducting returns, discounts and related adjustments, which
represents the source of the main business income of the enterprise. Analyze
the net income data of different products or regions to understand which
business units contribute the most revenue and which businesses may need to
be adjusted or expanded. By comparing the historical net income data, we can
analyze the company's sales performance in different periods and find out the
reasons for growth or decline.
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2
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Reduction: Sales Cost (COGS)
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The cost of selling goods (COGS) =
inventory cost at the beginning of the period + procurement cost at the end
of the period - inventory cost at the end of the period
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Sales costs are the costs directly paid
by the company for the production or purchase of products, including raw
materials, labor and production and manufacturing costs. Cost fluctuations
may reflect the efficiency of the supply chain, such as rising raw material
prices and waste in the production process.
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3
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Gross Profit (Gross Profit)
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Gross profit = income - sales cost
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The gross profit is equal to the net
income minus the cost of sales, which represents the company's remaining
income after selling products, reflecting the production and sales efficiency
of the enterprise. It is a key indicator to measure the profitability of an
enterprise. A high gross margin indicates that the company performs well in
controlling costs or product pricing.
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4
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Deduction: Operating expenses (Opex)
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Operating expenses = Σ SG&A, R&D
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Operating expenses include expenses
incurred in the company's daily operation, such as sales, marketing,
management expenses, research and development expenses, etc., which are not
directly related to production. Identify the proportion of various operating
expenses, analyze which expenses are growing faster, and whether there is
room for optimization.
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5
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Operating income (EBIT)
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Operating income = gross profit –
operating expenses
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Operating income, also known as profit
before interest and tax, is the company's remaining profit after deducting
operating expenses, reflecting the core profitability of the enterprise.By
analyzing the changes in EBIT, evaluate the company's overall effectiveness
in controlling costs and increasing revenue.
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6
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Deduction: interest expenditure
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Interest expenditure = debt × interest
rate (%)
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Interest expenses are the expenses paid
by the company for borrowing, including bank loans, bond interest, etc.,
which are financial costs. Analyze changes in interest expenditure and assess
whether the company has the ability to reduce borrowing costs or increase
profits by better managing the debt structure.
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7
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Income before tax (EBT)
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Pre-tax income = interest pre-tax profit
- interest expenditure
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TaxThe previous income is the company's
profit after deducting all operating expenses and interest expenses, and
income tax has not been calculated. Analyzing the changes in pre-tax income
can help the company evaluate whether the tax optimization strategy is
effective and provide reference for future financial planning.
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8
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Deduction: income tax
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Income tax = pre-tax income × effective
tax rate (%)
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Income tax is the tax paid by the company
according to the pre-tax income. The specific amount is affected by the tax
policy and the corporate income tax optimization strategy. Analyze whether
the company reduces tax expenditure and improves net profit through tax
optimization strategies under the premise of legal compliance. If the company
operates in different countries or regions, income tax expenditure will vary
depending on the tax rate. Analyzing tax expenditure can help optimize the
global layout.
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9
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Net profit
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Net income = pre-tax income - tax
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Net income is the final profit of the
company after deducting all expenses. It is the core indicator of the
company's overall business performance. It is usually used to calculate the
return of the company's shareholders (such as earnings per share) and is an
important basis for measuring the value of the company.
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Note: The indicators selected in this case
are common indicators in income statement analysis. In the analysis work,
priority should be given to selecting the indicators that have the greatest
impact on the business to ensure that the purpose of the analysis is consistent
with the business objectives and key performance. In the actual business, the
specific details of income, cost and expenditure of each enterprise will be
different, depending on the actual situation of the enterprise. This analysis
project sets the standard profit and loss.The content of the table template.
3.2 Power BI Visualization Scheme
Note: The DEMO page data is simulated data,
which is for reference only to the analysis angle and Power BI function
display, and does not involve any actual business data.
4. Analysis and interpretation
(Net income, sales costs, gross profit,
operating expenses, operating income, net income) Compare the trends of this
year and last year to find out the reasons for the year-on-year increase or
decline. Analyze whether there are seasonal fluctuations and special events
(such as promotional activities and policy changes).
Target achievement rate: calculate the
achievement rate by comparing the actual performance with the scheduled target
on a monthly basis. ExtendThe month with a high success rate indicates that the
plan is better implemented, while the month below the target needs to analyze
the reasons, such as market demand fluctuations and internal management
problems.
Analyze the proportion of income of
different product lines, provinces and cities, and see which part is the main
source of income, cost, gross profit, operating expenses, operating income and
net income, and what is the trend of change.
According to income, cost, gross profit,
operating expenses, operating income and net income, rank each product and find
out the best performing products.
5. Application effect
Through the above analysis perspectives and
methods, remarkable results can be achieved in practical applications:
Compared with last year's trend, this
analysis directly affects budgeting, resource allocation and marketing
strategies. For example, if the profit margin falls this year, it may be
necessary to increase the input to control costs or improve operational efficiency
in the following year.
In the actual operation, the management can
use the target achievement rate to adjust sales incentives, accelerate the
promotion of new products or optimize sales channels. For example, if the sales
target is not achieved for several consecutive months, the management can
adjust the marketing strategy or increase the market investment and respond
quickly.
The management can analyze the health of
the product line and plan the resources reasonably according to this. For
example, by reducing the budget of inefficient product lines, more resources
can be invested in high-profit and high-growth product lines, and the company's
product portfolio can be optimized.
If a product is at the top of the sales
ranking for a long time, the company can consider increasing the market
investment of the product or developing more similar products; on the contrary,
for the bottom-ranked products, it can be optimized or eliminated. This can
also help the company learn from the existing successful experience when
developing new products.
Through this analysis, the company's
management will gain clear insights into the financial profit and loss, clarify
the key factors affecting the company's profitability, and provide data support
for the next decision-making. Adjust the business strategy in real time through
the enterprise to ensure the optimal use of resources and avoid blind
investment. At the same time, this analysis helps enterprises identify future
growth points and potential risks, and enhance their adaptability and
competitiveness.