cogs ratio

COGS ratio is a financial metric used to assess the relationship between the cost of goods sold and a company’s revenue. The COGS ratio is calculated by dividing the cost of goods sold by the total revenue and multiplying by 100 to express it as a percentage. This ratio helps businesses understand how efficiently they are producing or acquiring the goods they sell. A high COGS ratio suggests that a large portion of revenue is being consumed by production or procurement costs, potentially reducing profit margins. On the other hand, a lower COGS ratio indicates better cost control and more profitability. Companies use the COGS ratio to monitor their financial health, identify cost-saving opportunities, and make pricing adjustments to maintain profitability.