why is cost of goods sold cogs important 
cogs is an important metric on financial statements as it is subtracted from a company s revenues to determine its gross profit gross profit is a profitability measure that evaluates how efficient a company is in managing its labor and supplies in the production process because cogs is a cost of doing business it is recorded as a business expense on income statements knowing the cost of goods sold helps analysts investors and managers estimate a company s bottom line if cogs increases net income will decrease while this movement is beneficial for income tax purposes the business will have less profit for its shareholders businesses thus try to keep their cogs low so that net profits will be higher 1