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· Posted on
September 20, 2022

Um. WTF is COGS?

From COGS to cos, you'll be speaking fluent #finance in no time.

What's the key learning?

Aussies use a lot of slang.

Indeed, if you've moved here recently, you'll have stumbled your way through “arvo”, “tinnies” and “devo”.

Meanwhile, hop online, and every day a new "ELI5" (explain it like I'm 5) to "GRWM" (get ready with me) acronym emerges from the language ashes.

COGS? Clogs? What does this even mean??

COGS is just the GRWM of a company balance sheet

It’s a similar story in finance. When talking about business, people cut concepts down. It can sound like a secret language, but we promise it’s not that hard.

If Elle Woods can nail law, you can nail finance

COGS and cos

COGS stands for “cost of goods sold”. It's interchangeable with cos, which stands for “cost of sales”.

In a company’s financial results, you’ll find this bad boy below “revenue” but above “profit”.

Revenue

In a business, you're selling a thing. What someone is willing to pay for that thing, be it shoes, makeup, or a packet of Tim Tams, goes towards your revenue.

Revenue vs COGS

Let's say you sell that packet of Tim Tams for $4.50. Cool! We just made $4.50!

Yeah, cool. But a company doesn't keep every dollar of that.

They actually have to make those biccies.

Breaking down costs

For that, you've got to get flour, sugar, yummy mystery chocolate stuff, and of course, someone makes the magic happen with time and effort, so labour. For fun, let's say all that costs $3.50 per packet of Tim Tams. That's your COGS.

Costs of goods sold, aka cos.

You made $4.50, but it cost you $3.50 to make that $4.50.

Capeesh? 

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