2 min read
Definition
Cost of goods sold captures the costs directly tied to what you sold: raw materials, the wholesale cost of stock, and direct labour. It excludes overheads like rent and admin. Revenue minus COGS is your gross profit.
In plain terms
It tells you how much each sale actually costs to fulfil, before the fixed costs of running the business. Rising COGS quietly erodes margin.
Why it matters for your company
Watching COGS as a share of revenue shows whether your product economics are healthy. See reading your profit and loss.
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