What is Cost of Goods Sold (COGS) and why it matters?
COGS is an extremely important part of a company’s P&L. It includes any expense that a business incurs in direct production of a sale.
COGS (cost of goods sold) also sometimes called the cost of sales in a service based business.
Understanding COGS helps you see how a business is managing its direct costs over time. It's important to follow the trend of COGS in P&L as Lowering COGS translates to More profit! Businesses can lower their COGS by negotiating better deals with suppliers, or finding more efficient ways to make their stuff.
Remember, COGS focuses on only direct costs to produce a product or deliver a service, not indirect costs.
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