cost of goods sold

Definition

The direct costs of producing goods or services that were actually sold, abbreviated as COGS. It includes materials and labor but not the CEO's golf club membership, no matter how insistently he argues it's 'client development.'

Example Usage

The restaurant's COGS was 35% of revenue, which would be sustainable if they stopped letting the chef experiment with truffle foam.

Origin

Fundamental accounting concept formalized in manufacturing accounting during the Industrial Revolution.

Fun Fact

Service companies debate whether they even have COGS or just operating expenses, leading to surprisingly heated arguments among accountants.

Source: Income statement terminology

Related Terms

Intermediate

basis point

One hundredth of one percent (0.01%), because apparently regular percentages weren't confusing enough for finance professionals. When your mortgage rate increases by 25 basis points, congratulations—you're paying 0.25% more.

💰 Finance / Accounting

Intermediate

materiality threshold

The dollar amount below which errors or omissions don't matter enough to disclose in financial statements—essentially the accounting version of 'close enough for government work.' It's how auditors decide which issues are worth losing sleep over.

💰 Finance / Accounting

Beginner

lender

The entity that gives you money now in exchange for you giving them more money later, ideally with interest and your sanity intact. Banks, credit unions, and that one friend who still brings up the $20 from 2015 all qualify.

💰 Finance / Accounting

Intermediate

debt-to-equity ratio

A leverage metric comparing total liabilities to shareholder equity, revealing whether a company is conservatively financed or one recession away from bankruptcy. Financial analysts' favorite way to judge how recklessly a company borrows.

💰 Finance / Accounting

Beginner

duty-free

Products sold without government taxes at airports and border zones, creating the illusion of amazing deals while you're trapped in transit. The magical land where alcohol and perfume become 'affordable' because customs duties don't apply. Convinces travelers they're saving money while spending it on things they didn't need in the first place.

💰 Finance / Accounting

Advanced

securitize

The financial alchemy of bundling loans or receivables together and selling them as securities to investors, because apparently individual mortgages aren't exciting enough. It's how banks turn illiquid assets into tradeable products, which worked brilliantly until 2008 when everyone realized some of those bundles were basically garbage wrapped in AAA ratings. Still practiced today, but with slightly more supervision.

💰 Finance / Accounting

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