Page 3: Cadbury Shweppes´ Profit and Loss Account
A Profit and Loss Account is a table compiled at the end of an accounting period, to show gross and net profit or loss. It is very useful for helping readers to understand the financial performance of a company. A review of the Profit and Loss Account will help shareholders and other users to see how the company is performing. The table shows three key figures for 2004.
A simplified version of Cadbury Schweppes' Profit and Loss Account for 2004 is set out here. When reading a Profit and Loss Account, it is easier to understand a company's financial performance by comparing the latest figures with the previous years. To help you do this, the 2005 results will be included in our online version, when they are published in February.
The Profit and Loss Account shows a summary of the transactions of the business for a period of one year.
1. The top line shows that the sales revenue from products such as Dr Pepper, Halls, Schweppes, Trident and Cadbury Dairy Milk, came to £6,738 million. This can be called either 'revenue' or 'sales' historically called turnover).
2. Costs were involved in making these products - the cost of raw materials such as cocoa, packaging, transport, staff salaries, advertising, etc. The production costs added up to £5,668 million. These are deducted from revenue because they are paid out. It is common to show negative values in brackets in financial statements.
3. Cadbury Schweppes owns a share of some other companies - raising additional income.
4. Cadbury Schweppes has borrowed money, for example, to buy new companies. It must pay interest payments on these loans.
5. Cadbury Schweppes must pay Corporation Tax to the government (£185 million, which goes towards helping to pay for items such as education and health spending). This is a tax on profits. Once tax has been deducted the profit for the year is £547 million.
6. The profit for the year is the amount of profit after all external costs are deducted. The profit for the year is then used to either pay a dividend to shareholders or is retained by the company in its reserves, for future use.
7. Finally, a calculation is set out of Earnings per Share - the profit divided by the number of shares in the company. This is 25.9p. Investors will want to see this figure rising over time, as it indicates the return on their investment into the company, and they will measure percentage increases and compare the growth rates of different companies.