# How to read a P&L, top to bottom > How to read a profit and loss statement: revenue, cost of revenue, gross profit, operating expenses, EBITDA and operating profit, and what the P&L doesn't tell you. - Course: [Finance for Product People: From Unit Economics to Business Cases](https://productovi.com/courses/finance-for-product.md) - Module: Are we actually profitable? - Lesson 5/32, ~26 min - Source: https://productovi.com/courses/finance-for-product/reading-a-pnl ## Straight to the bottom line **Alex Tutor:** On Klasna's product team, the autumn report has just landed, and Leo has read exactly one line of it. **Leo:** Hanna sent the autumn numbers, September to November. I scrolled straight to the bottom: 1.7 million UAH of operating profit. So we're profitable. I want to tell the team today. **Hanna:** The bottom line is right. But our new board member will read the report top to bottom, and so should we. Every line answers its own question. **Alex Tutor:** A **P&L**, the profit and loss statement (or income statement), is a staircase. To read one, start with what the company earned in the period and step down, subtracting costs in a fixed order. Each landing has a name. Here is Klasna's autumn quarter. > **Klasna's P&L, September–November 2026** > > | Line | UAH | > |---|---| > | Commission on 1:1 lessons | 4,660,750 | > | Expired lessons | 629,310 | > | Klasna Club | 902,700 | > | Klasna for Teams | 640,000 | > | **Revenue** | **6,832,760** | > | Payment fees | −390,616 | > | Video and AI | −794,220 | > | Club hosts and AI | −195,225 | > | Teams tutor payouts | −344,000 | > | **Gross profit** | **5,108,699** | > | Support coordinators | −418,000 | > | Team salaries | −1,800,000 | > | Marketing | −880,000 | > | Office and tools | −252,000 | > | **EBITDA** | **1,758,699** | > | Depreciation | −54,000 | > | **Operating profit** | **1,704,699** | **Sofia:** The top line says 6.8 million of revenue. Is that what families paid us? **Alex Tutor:** No. Families paid much more for 1:1 lessons, but most of it belongs to tutors. **Revenue** is what Klasna earned from what it delivered this quarter: its commission on lessons, the Club, Teams and lessons that expired unused. Why the families' total isn't revenue is our next lesson. **Hanna:** Keep the word 'earned' in mind. The P&L counts a lesson when it happens, not when the money for it arrives. > **Exercise:** Klasna's autumn P&L starts with 6,832,760 UAH of revenue. What does this number measure? ## Gross profit: what delivery costs **Alex Tutor:** Step two is **cost of revenue**: what it costs to deliver what we sold. Payment fees, video minutes and AI, the Club's hosts, and tutor payouts for Teams lessons. 1,724,061 UAH in total. **Sofia:** Why are Teams tutors in there, but not the tutors of 1:1 lessons? **Alex Tutor:** Because the 1:1 tutors' share was never counted as Klasna's revenue. Teams is sold as Klasna's own service, so its tutors are a delivery cost. Hold that thought for the next lesson. **Alex Tutor:** Revenue minus cost of revenue is **gross profit**: 5,108,699 UAH. Divide it by revenue and you get the **gross margin**: how many kopiykas of each hryvnia of revenue survive delivery. **Hanna:** That's the first health check. If gross margin is thin, no amount of growth fixes the bottom line. > **Exercise:** Use Klasna's autumn P&L. What is Klasna's **gross margin** for September–November 2026? Round to two decimals. ## Operating expenses: running the company **Alex Tutor:** Next come **operating expenses**: what it costs to run Klasna, whatever was delivered. Coordinators 418,000, team salaries 1,800,000, marketing 880,000, office and tools 252,000. 3,350,000 UAH in total. **Leo:** Marketing is an expense? It's an investment in growth. **Hanna:** It may work like one, but the money was spent this quarter, and the families it brought may not stay. The P&L puts it where it was spent. **Alex Tutor:** Two places Leo might want the campaign to sit. Which one is the P&L? > **Exercise:** Klasna spent part of its 880,000 UAH autumn marketing on a paid social campaign. Leo sees it as an investment in growth. Where does Klasna's September–November P&L put it? **Alex Tutor:** Gross profit minus operating expenses: 5,108,699 − 3,350,000 = 1,758,699 UAH. That's **EBITDA**: earnings before interest, taxes, depreciation and amortization. > **Exercise:** Which of these costs belong in Klasna's **cost of revenue**, above gross profit? Select all that apply. ## EBITDA vs operating profit: depreciation **Sofia:** What else is left to subtract after all the costs? **Alex Tutor:** In August Klasna bought new laptops for 432,000 UAH. They'll serve two years, so the P&L doesn't charge the whole price to one month. It spreads it: 18,000 a month. That's **depreciation**. **Alex Tutor:** Subtract the quarter's 54,000 and you reach **operating profit**: 1,704,699 UAH, or 24.95% of revenue. Interest and tax would come below it; Klasna has no loans, so we stop here. **Alex Tutor:** Try the spreading rule on a new purchase. > **Exercise:** In December Klasna pays 120,000 UAH for a recording studio kit that will serve 3 years, spread evenly. How much **depreciation** does each quarter's P&L carry for it? **Leo:** So EBITDA is the nicer number. Why not lead with it? **Hanna:** It's handy for comparing companies with different equipment. But the laptops are a real cost: we'll buy new ones again. Show both. **Alex Tutor:** Hanna wants both numbers, so work out EBITDA's share of revenue too. > **Exercise:** Use Klasna's autumn P&L. What is its **EBITDA margin**, EBITDA as a share of revenue? Round to two decimals. > **Exercise:** Put the lines of a P&L in order, from the top down. ## What the P&L doesn't say **Leo:** Fine. Can I tell the team we have 1.7 million more in the bank than in August? **Hanna:** No. Teams was invoiced 640,000 at the end of November and hasn't paid yet. Families prepaid lessons we'll deliver in winter. The laptops were paid for in August. **Alex Tutor:** The P&L measures what was earned and what it cost to earn it. The bank measures money moving. Over years they agree; in any one month they don't. **Sofia:** So the P&L answers 'are we profitable?', not 'can we pay salaries on Friday?' **Alex Tutor:** Exactly. And read the size of each line, not just the total: 629,310 of revenue came from lessons that expired unused. Where it comes from is a lesson of its own. > **Exercise:** **True or false:** Klasna's operating profit of 1,704,699 UAH means its bank balance grew by about that much between September and November. ## Your turn: a message for the team **Leo:** Give me a few sentences for the team chat: are we profitable, and what shouldn't they read into it? **Alex Tutor:** Walk down the staircase: gross margin, operating expenses, operating profit. Then add one thing the P&L doesn't show. **Sofia:** Short enough for a chat, then, but with the numbers that matter. > **Exercise:** Leo asks for a short message for the team chat (3–5 sentences): is Klasna profitable this autumn, and what shouldn't the team read into it? Walk down the P&L with numbers and name at least one thing it doesn't show. > **Key ideas** > > - A **P&L** steps down from revenue to operating profit in a fixed order: revenue → cost of revenue → **gross profit** → operating expenses → **EBITDA** → depreciation → **operating profit**. > - **Revenue** is what the company earned from what it delivered in the period, not what customers paid. > - **Gross margin** = gross profit ÷ revenue: Klasna's autumn 5,108,699 ÷ 6,832,760 = 74.77%. > - **Depreciation** spreads the price of long-lived things (laptops: 432,000 over 24 months = 18,000 a month). EBITDA leaves it out; operating profit doesn't. > - The P&L shows what was earned, not cash: unpaid invoices, prepaid lessons and equipment bought earlier all make the bank differ from the bottom line. **Alex Tutor:** Next time: families paid 14.7 million UAH for 1:1 lessons this autumn. Why is only 4.7 million of it revenue? - Previous lesson: [Case: should Klasna launch group lessons?](https://productovi.com/courses/finance-for-product/group-lessons-case.md) - Next lesson: [Take rate: what a marketplace really earns](https://productovi.com/courses/finance-for-product/gmv-vs-revenue.md) --- Productovi Learning. Free, no sign-up needed to read.