Summary
COGS, or cost of goods sold, represents the direct costs attributable to the goods or services a company sold during the reporting period.
How to read it
Compare COGS with Revenue to understand the direct-cost component of gross profit. If COGS rises faster than Revenue, gross margin may come under pressure unless pricing or product mix offsets the increase.
Things to keep in mind
The exact costs included depend on the company’s business model and accounting presentation. Review the company’s notes when comparing COGS between different companies.