As the end of the year approaches, small business owners are looking for ways to increase profits in the coming year. Retailers carefully monitor their profit and loss (P&L) statements to evaluate the financial goals they need to meet to make a profit. A profit and loss statement can shed light on whether a business has the capital to start and sustain itself and where a retailer could reduce costs or increase sales to reach expected net profit. Profit and loss statements are also developed to guide retailers towards their financial branding; if a company is off track, a retailer can determine where to adjust to hit the target, keeping net profits in the black. Meaning of Profit and Loss A profit and loss statement or income statement is an important tool for retail success. The importance of an income statement is to help retailers develop sales goals to achieve, price goods appropriately, and determine whether their total operating expenses are too high relative to sales and need to be adjusted. It is a system of checks and balances that allows a company to account for all money spent, made, and owed, and that keeps the company on track to meet its intended financial goals. Each part of the income statement plays an important role in the overall picture of the company. profitability. Net sales are determined by the quantity of product sold by a retailer. However, net sales must take into account any discounts, returns, and sales allowances to calculate an accurate dollar figure. The cost of goods directly affects the retailer's overall net sales and is usually the largest expense on a profit and loss statement. Cost of goods (COG) represents the raw materials and labor combined to produce an item. One retailer might only sell fifty units a year compared to another retailer… half paper… time avoids bankruptcy. Both the income statement and the balance sheet provide the retailer with an objective view of business activities that he might not otherwise see. Using an income statement and balance sheet provides the opportunity for a retailer to achieve goals, plan for growth, and manage money by analyzing data. Works Cited http://smallbusiness.chron.com/significance-gross-profit-margin-4132.htmlBigger Pockets., (2009). Importance of operating expenses and related operating expense ratios. Retrieved from http://www.biggerpockets.com/blogs/1272/blog_posts/23423-importance-of-operating-expenses-and-operating-expense-ratiosBerman, B., & Evans, J.R. (2013). Retail Management: A Strategic Approach (12th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.Small Business Development., (2013). Retrieved from http://www.smallbusiness.wa.gov.au/understanding-profit-loss-statements/