Cost of goods sold vs cost or revenue

[Steve O]

Need to explain to a few people in our finance department why inventory turns ratio is an important metric. While I'm pretty comfortable with discussing the importance of the turns ratio I would like to be able to say that it is a metric investors look at. However, as I look over income statements and balance sheets of various companies I can only find a line for cost of revenue. Near as I can tell COGS is a subset of cost of revenue - correct? Is there anywhere in a companies financial reporting where COGS is broken down as a separate line item? It is needed to calculate the turns ratio. Any help appreciated

 

Thanks

[Live&DieBillsFootball]

Cost of Revenue is the collective cost of manufacturing and distributing the products and services that a company sells.

 

Cost of Revenue is found in the income statement under operating expenses. Companies can exercise quite a bit of flexibility in defining what constitutes cost of revenue. In principle, any costs that is directly attributable to production and distribution of goods can be counted as cost of revenue. The term does not include indirect costs such as salaries, depreciation or other fixed costs.

 

Cost of Revenue is different from Cost of Goods Sold (COGS) since it usually includes ancillary costs such as distribution costs, product development costs and cost of providing after sales service. The term is especially used in service-based companies, such as consulting firms or software companies. This is because it is harder separate cost of goods sold from distribution costs in these industries.

 

Is there a Gross Profit number on your financials? Sales - Gross Profit should give you COGS.

 

Inventory turns is an important number for several reasons. Most importantly, if you can get your inventory to turn over faster than your Vendor payment terms, you are essentially having your vendors finance your inventory, which is a good position to be in. For example. if you are getting 12 turns a year on your inventory (turning every 30 days) and you're paying your vendors in 30 days, your vendors are basically financing your inventory for you.

[Steve O]

Is there a Gross Profit number on your financials? Sales - Gross Profit should give you COGS.

 

Inventory turns is an important number for several reasons. Most importantly, if you can get your inventory to turn over faster than your Vendor payment terms, you are essentially having your vendors finance your inventory, which is a good position to be in. For example. if you are getting 12 turns a year on your inventory (turning every 30 days) and you're paying your vendors in 30 days, your vendors are basically financing your inventory for you.

 

Thanks for the input. We have a gross profit line and a Selling General and Administrative line that is subtracted from it along with a few other things to get either a net profit or net income line.