Basic Business English Lesson: Profit & Loss

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Today, let’s look at some key vocabulary and expressions used to talk about a company’s financial situation. You can refer to the financial report for ABC Company above. The definitions of the words in bold are below this paragraph

Most companies operate on a fiscal year, which is divided into four quarters. In the chart above, we can see the First Quarter Results for ABC Company. Sales grew each month and the total revenue was $51,454. Expenses were the same each month this quarter. The bottom line was different each month, but the overall result was a profit of $5,704. In April, ABC made a loss of $5,000. In May, ABC broke even. Because of an increase in sales, ABC made a nice profit of $10,704 in June.

  • Fiscal year (n) (or financial year) means a one-year period used for accounting or tax purposes.
  • Quarter (n) means a three-month period. A fiscal year is often divided into a three-month period.
  • Sales (or revenue) (n) is money that comes in to the company. It means the money the company makes from selling its goods or services.
  • Expenses (n) is money that goes out from the company. It means the money the company spends in order to do business. Generally, rent and employee’s salary are the biggest two expenses in a company.
  • Profit (n) is the positive result of sales minus expenses. It is the money that remains after the expenses are paid. We use make a profit.
  • Loss (n) is the negative result of sales minus expenses. It is the negative amount of money after the expenses are paid. We use make a loss.
  • Break even (v) is the zero result of sales minus expenses. When a company breaks even, it spends the same amount of money that it earns, so the result is zero.
  • The bottom line (n) refers to the last line, the bottom line of a financial statement. It means the financial results of the company and the bottom line could be either profit, loss, or breaking even.

Have a look at the paragraph above once more to review this vocabulary. Thanks for studying today!

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