A profit and loss starts at revenue and reaches profit through three subtractions. Each one answers a different question.
Revenue less cost of goods sold gives gross profit
Cost of goods sold is what it cost to deliver the work: materials, direct labour, subcontractors.
What remains is gross profit, and as a percentage it is gross margin — the answer to whether the work itself is priced correctly.
Gross profit less operating expenses gives operating profit
Operating expenses are the costs of being in business rather than of doing the work: rent, insurance, office wages, software, marketing.
What remains is operating profit, the answer to whether the business as a whole works.
Operating profit less interest and tax gives net profit
What is finally kept — see profit margin.
The most common error in reading one
A cost on the wrong line. Direct labour recorded as an operating expense makes gross margin look excellent and overheads look bloated, and both conclusions are wrong.
Nothing on the statement flags it. It is only found by checking what each account actually contains — see chart of accounts.
Compare like with like
Against the same period a year earlier, which holds seasonality constant. Against the previous month only where the business is not seasonal.
Read percentages, not amounts
Amounts rise with revenue and say little. Each line as a percentage of revenue is what shows whether something is drifting: materials at thirty-two per cent against twenty-eight last year is a finding, and the raw figures would have hidden it behind growth.
It is not cash
Profit is earned, not received. What the bank account did is a different question — see profit and cash and the cash flow statement.