What the Company Earned

2.1 — The first number anyone asks for

Meera and Arjun have been running Sunrise Bakery in Pune for a year. They are made up — no such bakery exists — but we are going to follow their books through this whole module, so it is worth knowing them.

In April their accountant sits down with a year of receipts and answers one question: did the business make money? He adds up everything that came in from selling cakes, subtracts everything it cost to make and sell them, and writes a single figure at the bottom.

That is a profit and loss statement, and it is the most-read document in finance. It has exactly one job: to say what a business earned over a period, after everything it cost to earn it.

The structure never changes, however large the company. Money in at the top. Costs in the middle. What is left at the bottom. Everything in this chapter is a refinement of those three lines.

2.2 — Revenue, or total income?

Sunrise sold ₹40 lakh of cakes and bread. Separately, ₹18,000 of interest arrived on the deposit they keep for emergencies. Meera assumes the top line is ₹40,18,000.

It is not, and the distinction matters more than it looks. A filing separates the two:

• ▹**Revenue from operations** — money earned by doing the thing the business exists to do. Selling cakes. Refining oil. Writing software.
• ▹**Other income** — money that arrived from something else. Interest on deposits, dividends, a one-off gain on selling an old van.
• ▹**Total income** — the two added together.

Here are Reliance's figures for the quarter ending 30 June 2026.

Why separate them at all? Because other income does not repeat reliably. A company whose profits are growing because it sells more is in a different position from one whose profits are growing because it sold a building. Read the two lines apart and you can tell those cases apart. Read only the total and you cannot.

2.3 — Where the money goes on the way down

Below income sits the expense stack. The order is not arbitrary — it runs roughly from the costs closest to making the product to the costs furthest from it.

The line with no money attached

Depreciation and amortisation, ₹15,100 crore, is the odd one in that list. Every other row involved money leaving the company this quarter. This one did not.

Sunrise bought a commercial oven for ₹9 lakh two years ago. It should last nine years, so the accountant charges ₹1 lakh a year against profit. This year's ₹1 lakh reduced the reported profit and no money moved — the cash all left two years ago.

Spreading an asset's cost across the years it is useful is called depreciation, and it is why a company can report a modest profit while generating a great deal of cash. Chapter 3 is entirely about that gap, and this line is the main reason it exists.

Why the changes-in-inventories line is negative

The −₹1,326 crore looks like an error and is not. Cost of materials counts what the company BOUGHT. If some of it went into finished goods still sitting in a warehouse rather than out of the door, that cost belongs to a future sale, not this one. The changes-in-inventories line adds it back. A negative figure here means stock grew during the quarter.

2.4 — Two kinds of tax

Total income minus total expenses gives profit before tax: ₹30,630 crore. Then the tax line, which is really two lines.

Current tax is the amount actually payable to the government for this period. Deferred tax is an accounting adjustment, and it exists because tax law and accounting rules disagree about timing.

Suppose the tax rules let Sunrise write off the whole ₹9 lakh oven in year one, while the accounts spread it over nine. In year one the tax bill is small and the accounting profit is high. In later years it reverses. Deferred tax is the bookkeeping that stops those years looking artificially good and then artificially bad.

Practical consequence: a company's tax expense in any single period may not match what it writes a cheque for, and a tax rate that looks strange for one quarter often normalises across a year.

2.5 — The line almost nobody reads

Subtract ₹7,629 crore of tax from ₹30,630 crore of profit before tax and you get ₹23,001 crore. But the filing reports net profit of ₹23,196 crore. There is ₹195 crore unaccounted for.

It is a line called share of profit of associates and joint ventures. When a company owns a stake in another business that it influences but does not control, it does not consolidate that business's revenue and costs. It simply adds its share of that company's profit, as one line, here.

Small here. On some companies it is not, and when it is large it is worth knowing that a chunk of reported profit comes from businesses whose revenue never appears anywhere on the statement you are reading.

2.6 — Whose profit is it, though?

This is the most useful thing in the chapter, and it is the part headline coverage almost always skips.

Reliance reported net profit of ₹23,196 crore. That is not the profit belonging to Reliance's shareholders. The filing splits it in two, immediately below.

Here is why. When a company owns most but not all of a subsidiary, consolidation rules require it to add ALL of that subsidiary's revenue, costs and profit into the group accounts — even the part belonging to the other shareholders. That would overstate the parent's earnings, so the profit belonging to those outside investors is stripped out on this line.

Imagine Sunrise buys 70% of a small cafe. The group accounts show all of the cafe's sales and all of its profit. But 30% of that profit belongs to the person who still owns the other slice, not to Meera and Arjun. Non-controlling interest is that 30%, made visible.

The gap here is about a tenth of reported profit. On holding companies and conglomerates with part-owned subsidiaries it can be far larger, and it is always worth a glance before you build anything on a net profit number.

2.7 — The second statement hiding underneath

Below net profit sits a section most readers never reach: other comprehensive income. Reliance reported ₹3,267 crore of it in this quarter.

These are gains and losses that have genuinely happened to the company's wealth but are not treated as part of the period's trading result — currency translation on foreign operations, some revaluations, certain pension movements. They are held apart because they are not the outcome of running the business, and folding them into profit would make earnings jump around for reasons unrelated to trading.

You will rarely need it. But if a company's equity grows by more than its retained profit explains, this is usually where the difference went.

2.8 — Where this sits on EquityTale

Every company page shows the filed profit and loss statement, quarter by quarter and year by year, under Full financials — the same lines in the same order as this chapter.

Two of the Health Score's six pillars are built directly on it. Profitability and returns reads margins and returns on capital; Growth and consistency reads how revenue and profit have moved across the filed years. Reliance scores 39.9 out of 100 on the first — a reminder that a very large profit and a strong RETURN on the money employed to earn it are quite different things, which is Module 2's subject.

As for Sunrise Bakery: the accountant's answer was a profit of ₹6 lakh. Meera was pleased for about four days, until she tried to pay the flour supplier and found ₹40,000 in the account. That is chapter 3.