So, what do you need to know about them in regards to inventory management? Read more to find out.
What Is the Cost of Goods Sold?
The cost of goods sold is vital for a company as it’s an important aspect of their financial statements. That’s because it’s removed from the revenues the company generates to find out the gross profit generated. It’s the reason why you record costs of goods in the income statements. This is how a company measures its profitability so investors and analysts can know the bottom line.
What Is Inventory?
Inventory is a company’s asset, just like how cash is an asset. It refers to all products for sale like raw materials, in-process goods, as well as finished goods. These are called inventory in stock because they are the goods and products that are at hand to be sold.
It’s also vital for a company as the turnover represents a primary source of the revenue generated. This way, it lets the company know the earnings of the shareholders.
Inventory is a current asset that can go up and down, just like how cash does, depending on the sales of a given period. It’s also the middleman between manufacturing and order fulfillment.
How Are COGS and Inventory Related?
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