Firstly, the Cost of Goods Sold (COGS) is frequently known as “cost of sales” and can be displayed in a formula:
COGS = Beginning Inventory + Purchases during the period − Ending Inventory
If you are building a business, COGS can be usually found on an income statement, under the category sales, or revenue.
Example: if you had €10,000 of worth inventory at the beginning of the period and bought €2,000 extra and the ending inventory was worth only €4,000, your COGS value would be €8,000. Now as you know that your cost of goods sold for the year is €8,000 - you can start making better business decisions and maybe find new vendors with better pricing.