What is meant by flow through on a P and L?

Flow through on a Profit and Loss (P&L) statement refers to the extent to which an increase in revenue translates into an increase in operating profit or net income. It highlights the efficiency of a business in converting sales growth into profit, often expressed as a percentage. A higher flow-through rate indicates that a larger portion of incremental revenue contributes to the bottom line, reflecting effective cost management and operational leverage. Conversely, low flow-through suggests that increased revenues are not effectively converted into profit, potentially due to rising costs or inefficiencies.