What are the direct costs or Costs of Goods Sold? Let's understand with an example
Cost of goods sold or cost of service is the second most important thing to look at in an income statement - let us see why and how?
Why a series of articles on financial statements?
The most asked question from me is how to look at financial statements or any variation of them.
Be it YouTube comments, emails or even some course students.
The problem they face is either the explanation is hard to grasp for non-finance or accounting-related readers or they don't have enough examples.
So we thought why not create a chain of blogs ⛓️ where we can explain the most important things to look for in financial statements? Usually, this subject is very boring and readings are long before anyone can comprehend what's happening, so we broke it into several short pieces.
Each blog will be 300 words or less with live examples from companies.
What will we discuss?
Starting from the income statement, and linking it to the balance sheet and cash flows.
Starting from the very basic like:
- Sales and sales growth or declines,
- When (reasons be it company or industry-specific, or due to general economy) do sales fall or go up?
- The difference between sales growth coming from higher volumes vs higher prices, moving on to
- What is the cost of sales or other costs?
- Different parts of costs that a company has to incur to make products,
- Why and how are costs different for different industries,
- What is gross margin and what does it represent?
Ideally, we want to conclude this long series at valuations.
Yes, it will be a long series but where are we going?
Who is this for?
Anyone other than finance professionals or investors who already use financial statements to understand companies. You already know this stuff, unless you are curious.
Receive it through emails? Sign up here!
Shall we start? ⬇️
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Cost of goods sold or cost of service is the second most important thing to look at in an income statement - let us see why and how?