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A filled-in profit and loss statement for a US distributor with $47,000,000 of net revenue, this year against last, read line by line from gross sales to net income. It shows how each subtotal is built, the same P&L as percentages of revenue, and the bridge that explains why net income rose 52% on 7% more revenue.
This profit and loss statement example is a US distributor with net revenue of $47,000,000. Gross profit is $11,750,000, a 25.0% gross margin; operating profit is $2,350,000, 5.0% of revenue; and net income is $1,500,000, a 3.2% net margin, up 52% on last year from 7% more revenue. Below is the statement in full, then each line in turn.
Fiscal years ending December 31, in thousands of dollars.
| Line (USD thousands) | This year | Last year |
|---|---|---|
| Gross sales | 48,600 | 45,200 |
| Returns and rebates | (1,600) | (1,200) |
| Net revenue | 47,000 | 44,000 |
| Cost of goods sold | (35,250) | (33,440) |
| Gross profit | 11,750 | 10,560 |
| Selling | (4,700) | (4,400) |
| Warehouse and distribution | (2,350) | (2,200) |
| General and administrative | (1,880) | (1,800) |
| EBITDA | 2,820 | 2,160 |
| Depreciation and amortization | (470) | (450) |
| Operating profit (operating income) | 2,350 | 1,710 |
| Interest expense | (350) | (390) |
| Income before taxes | 2,000 | 1,320 |
| Income tax at 25% | (500) | (330) |
| Net income | 1,500 | 990 |
The statement reads like a staircase, as the SEC's Beginners' Guide to Financial Statements describes it: start with sales at the top and take off one kind of cost at each step until net income is left at the bottom. The same layout, built from a trial balance with a monthly column for each line, is the profit and loss statement template.
Net revenue = Gross sales − Returns, rebates and discounts
Gross sales are invoiced sales. Returns, volume rebates owed to customers and early-payment discounts come off to give net revenue: 48,600 − 1,600 = 47,000. Every margin on this page is taken on net revenue, because that is what the company keeps from its sales. Rebates are a reduction of revenue, not a selling expense, and credit memos belong against the sales they reverse; credit notes and returns in revenue measures covers the timing.
Public companies follow the captions in the SEC's Regulation S-X, Rule 5-03, which starts with "net sales and gross revenues" and ends with income before income tax expense, then net income.
Gross profit = Net revenue − Cost of goods sold
Gross margin = Gross profit / Net revenue
For a distributor, cost of goods sold is the purchase cost of the goods sold, plus freight in, less supplier rebates, plus inventory adjustments: shrinkage, write-downs and count differences. Gross profit is 47,000 − 35,250 = 11,750, a 25.0% gross margin against 24.0% last year. One point of gross margin on $47,000,000 is $470,000, which is why distributors watch it every month.
Three lines, each with a clear job:
Total operating expenses before depreciation are 8,930 against 8,400 last year: up 6.3%, slightly less than revenue grew. The measures behind these lines (cost to serve, drops per route, sales per rep) are in sales KPIs for wholesale distributors.
EBITDA = Gross profit − Operating expenses (excluding D&A)
Operating profit = EBITDA − Depreciation and amortization
EBITDA is 11,750 − 8,930 = 2,820, a 6.0% EBITDA margin. It is a management subtotal: US GAAP does not define it, so each company states which lines it includes. Depreciation of racking, forklifts, delivery vehicles and the warehouse system is 470, leaving operating profit, or operating income, of 2,350: 5.0% of revenue against 3.9% last year. The SEC guide gives the same ratio: operating margin is income from operations divided by net revenues.
IFRS reporters will get a defined operating profit subtotal under IFRS 18, effective from 2027; under US GAAP the subtotal stays a presentation choice.
Net income = Operating profit − Interest − Income tax
Net margin = Net income / Net revenue
Interest on the revolving credit line that funds inventory is 350, down from 390. Income before taxes is 2,350 − 350 = 2,000. Tax at 25% assumes the 21% federal rate that IRS Publication 542 sets for corporations plus about four points of state income tax; the effective rate in a real set of accounts will differ. Tax is 500, and net income is 1,500: a 3.2% net margin, against 2.25% last year.
A common-size statement divides every line by net revenue, so two years of different size compare directly. With net revenue in row 4, the formula in each line is:
=B6/B$4
copied down and across.
| Line | This year | Last year |
|---|---|---|
| Gross sales | 103.4% | 102.7% |
| Returns and rebates | 3.4% | 2.7% |
| Net revenue | 100.0% | 100.0% |
| Cost of goods sold | 75.0% | 76.0% |
| Gross profit | 25.0% | 24.0% |
| Selling | 10.0% | 10.0% |
| Warehouse and distribution | 5.0% | 5.0% |
| General and administrative | 4.0% | 4.1% |
| EBITDA | 6.0% | 4.9% |
| Depreciation and amortization | 1.0% | 1.0% |
| Operating profit | 5.0% | 3.9% |
| Interest expense | 0.7% | 0.9% |
| Income before taxes | 4.3% | 3.0% |
| Income tax | 1.1% | 0.8% |
| Net income | 3.2% | 2.25% |
Read down the two columns and the story is clear: costs held their share of revenue, cost of goods sold fell a point, and that point went almost straight to the bottom line. Returns and rebates rose from 2.7% to 3.4% of net revenue, worth a question to the sales team.
For context, Aswath Damodaran's margins by industry, using US company data as of January 2026, show an average net margin of 1.17% for food wholesalers and 6.05% for retail distributors. A 3.2% net margin sits inside that range; your own trend says more than either figure.
Net revenue grew 6.8%, from 44,000 to 47,000. Net income grew 510, or 51.5%. A bridge lists every line's contribution to the change:
| Step (USD thousands) | Change in net income |
|---|---|
| Net income last year | 990 |
| Gross profit | +1,190 |
| Operating expenses | −530 |
| Depreciation and amortization | −20 |
| Interest | +40 |
| Income tax | −170 |
| Net income this year | 1,500 |
The steps sum to +510: 1,190 − 530 − 20 + 40 − 170. The gross profit step then splits into volume and margin rate:
Volume = (Net revenue this year − Net revenue last year) × Last year's gross margin
Margin rate = Net revenue this year × (Gross margin this year − Gross margin last year)
Volume is (47,000 − 44,000) × 24% = 720; margin rate is 47,000 × (25% − 24%) = 470; together 1,190. More than a third of the gross profit gain came from one point of margin, not from selling more. That is operating leverage: costs grew with revenue, so the extra gross profit fell through to net income at a higher rate.
Start from the profit and loss statement template, which builds the same lines from your trial balance and checks net income against the ledger, and take the margins per customer with gross margin vs contribution margin vs net margin. Upload the ledger export and Covirage's deterministic tools compute the P&L, the common-size view and the profit bridge, reconciled to the trial balance; the external AI model writes the explanation beside figures it did not compute. See FP&A reporting. To work through a statement like this one step by step, see how to analyze a P&L.
Revenue, cost of goods sold, gross profit, operating expenses, operating profit, finance costs, tax and net profit. Management versions often add EBITDA and a common-size column showing each line as a percentage of revenue.
The P&L covers a period and shows income, costs and profit for it. The balance sheet is a position at one date: assets, liabilities and equity. Net profit from the P&L flows into retained earnings on the balance sheet.
Distribution is a low-margin, high-volume business, so net margins in the low single digits are common. Compare against a published sector dataset for the same year and against your own history rather than a generic benchmark.
Monthly for management, as part of the close, and quarterly and annually for investors and lenders. US listed companies file quarterly reports on Form 10-Q and annual reports on Form 10-K.