Profit / Loss question..

[minghis]

Could someone help with this question?

If a company says it's 'lost £30m' does that mean it's actually cost £30m more to run the company than it made in profit, or is it that if the year before they made £100m but this year only made £70m?

Thanks in advance..

[wattsm666]

The total costs exceeded the total income by £30m.

[Billsnemesis]

Oh the simplicity of the question and the complexity of the answer...

"Cost" is almost Alice in Wonderland stuff - it can mean what you want it to mean. By the time you have stripped out depreciation, revaluation of assets, exceptional items and receipts, tax, off balance sheet deals, finance leases, joint ventures and heaven only knows how many other things you can almost begin to wonder how on earth anyone can pick up the true picture.

And that is often the intention (witness Enron and others). There are numerous books on accounting wheezes to make the figures look better or worse depending on your view point - and how to untangle them if you are trying to establish what is actually oging on. The only constant is that there are lies, damn lies, statistics and corporate accounts - in that order.

[joust]

Try EBITDA. It strips out some of the nasty things that are in "profit" and attempts to show on an operating basis if the company is profitable.

Try http://beginnersinvest.about.com/cs/investinglessons/l/blintroduction.htm for a free on-line course in it (but remember it's US based...)

J