What does COGS stand for?

The term COGS stands for Cost of Goods Sold. It represents the direct costs attributable to the production of the goods that a company sells. This includes the cost of materials and labor used in creating the product but excludes indirect expenses like distribution costs and sales force costs.

Understanding COGS is crucial for assessing a company's operational efficiency and profitability because it directly impacts gross profit. By effectively managing COGS, companies can improve their margins and overall financial performance. The calculation of COGS is essential for financial statements, as it helps in determining the company's gross income, which is revenue minus costs directly associated with producing the goods sold.

Contextually, while other options suggest various interpretations of costs, such as sales growth or general services, they do not align with the established definition and accounting practices surrounding COGS. This makes the first option the only accurate representation of what COGS stands for in a business context.