Glossary · Reading the business
COGS
In short
The direct costs to produce the goods a business sells. Buyers care because it directly impacts gross profit and the business's efficiency.
What it means in a deal
COGS includes material costs, direct labor, and manufacturing overhead. When evaluating a target business, you'll scrutinize COGS on the Profit and Loss Statement to understand true profitability before operating expenses. High COGS relative to revenue can signal inefficiency or pricing issues.
Related terms
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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