Question

If a financial analyst divides a company's cost of goods sold for year 2 by its cost of goods sold for year 1, he/she is performing?

Answer 1

If a financial analyst divides a company's cost of goods sold for year 2 by its cost of goods sold for year 1, he/she exists performing percentage analysis approach for horizontal analysis.

What is cost of goods sold?

The total sum that your company spent on expenses directly associated with the selling of goods is known as the cost of goods sold. Depending on the nature of your firm, this could also include raw materials, packaging, direct labor involved in making or selling the product, and items bought for resale.

Costs of Goods Sold (COGS) are the expenses incurred over a specific time period to produce your goods. COGS is calculated as initial inventory plus purchases minus ending inventory. An income statement's cost of goods sold (COGS) column lists the costs incurred by a business to produce, procure, and deliver a commodity or service to the final consumer.

The direct charge, cost, or expense related to producing goods and services that are sold to consumers at retail is known as the cost of goods sold. Overhead costs like rent, security fees, communication fees, etc. are not included in COGS.

Hence,  If a financial analyst divides a company's cost of goods sold for year 2 by its cost of goods sold for year 1, he/she exists performing percentage analysis approach for horizontal analysis.

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