what does cogs mean

what does cogs mean refers to “Cost of Goods Sold,” an essential financial metric for businesses. COGS represents the direct costs associated with the production of goods that are sold by a company, including the cost of raw materials, labor, and manufacturing expenses. It is an important figure for calculating a company’s gross profit, as it reflects the costs incurred to produce products before selling them. A higher COGS typically indicates that a business has a lower profit margin, while a lower COGS suggests greater profitability from sales. Businesses must track COGS to accurately assess their financial health and pricing strategies.