Cost of Goods Sold COGS

The direct costs of producing or buying the goods and services a company actually sold during the period.

Part of the Reading Financial Statements course · Lesson 3 of 33

Formula

Beginning Inventory + Purchases − Ending Inventory

What it is

Cost of Goods Sold (COGS) is the direct cost tied to the products or services a company delivered to customers. It typically includes raw materials, direct labor, and manufacturing or service-delivery costs. It excludes indirect costs like marketing, head-office salaries, and research.

Why it matters

COGS is what stands between revenue and gross profit, so it directly drives a company's margins. A pitfall is that different inventory-costing choices (such as FIFO versus weighted-average) can change reported COGS without any change in the underlying business, which affects comparability between companies.

How it's calculated

For a period it equals beginning inventory plus purchases or production costs, minus ending inventory.

How Quintarthai uses it

COGS is shown as a line in the 10-year income statement on the Financials tab of each company page, where it feeds the gross-profit and gross-margin figures.

Cross-border note. US GAAP permits LIFO inventory costing, but IFRS (used by Canadian filers) prohibits LIFO, so COGS and inventory may not be directly comparable between a US and a Canadian company in inflationary periods.

FAQ

Does COGS include marketing and admin costs?

No. COGS covers only direct production or delivery costs; marketing, administration, and research are operating expenses reported separately below gross profit.

Is COGS the same as cost of revenue?

They are very close — 'cost of revenue' is the term often used for service companies, while 'cost of goods sold' is used for firms that sell physical products.

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