Worked example: Sahyadri Foods plc, a packaged-snacks manufacturer — statement of profit or loss for the year ended 31 March 2026.
| Item | ₹ million | Explanation |
|---|---|---|
| Revenue | 800 | Value of sales made in the year (price × quantity sold) |
| Cost of sales | (480) | Direct costs of the goods sold — materials and production labour |
| Gross profit | 320 | Revenue − cost of sales |
| Expenses (overheads) | (200) | Administration, distribution, marketing, depreciation |
| Profit from operations (operating profit) | 120 | Gross profit − expenses |
| Finance costs (interest) | (20) | Interest on loans |
| Profit before tax | 100 | |
| Taxation | (25) | Corporation tax on profits |
| Profit for the year | 75 | Profit belonging to the shareholders |
| Dividends | (30) | Share of profit paid to shareholders |
| Retained earnings (for the year) | 45 | Profit kept in the business — added to reserves |
Suppose a 5% rise in raw-material prices increases Sahyadri's cost of sales by ₹24 million (to ₹504m), with nothing else changing:
Gross profit = 800 − 504 = ₹296m (down ₹24m)
Profit from operations = 296 − 200 = ₹96m
Profit before tax = 96 − 20 = ₹76m; tax (25% of profit before tax, as before) = ₹19m; profit for the year = ₹57m
If dividends stay at ₹30m, retained earnings fall from ₹45m to ₹27m.
A cost increase early in the statement flows down through every line below it.
| Change | Lines affected |
|---|---|
| Sales volume rises | Revenue and cost of sales rise; gross profit and all lines below change |
| Rent increases | Expenses rise; operating profit and everything below fall; gross profit unchanged |
| Interest rates rise | Finance costs rise; profit before tax and below fall; operating profit unchanged |
| Higher dividend paid | Only retained earnings fall; profit for the year unchanged |