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Clearing up Acronyms

Definition


Clearing up Acronyms

Just like in any field, finance and accounting use lots of acronyms. Here are some of the most common acronyms that are found in the income statement.



COGS stands for Cost of Goods Sold. It is one of the categories of expenses found on the income statement. COGS includes all the costs directly involved in producing the product or providing the service a company is going to sell. COGS is usually used in manufacturing companies. Examples include wages of people on a manufacturing line and the costs of the materials to make the product.



COS stands of Cost of Sales or Cost of Services. It is similar to COGS, in that it is all the costs directly involved in producing the product or delivering a service, but when the term COS is used, it usually means it is a service company. So, COS typically includes the wages of the people providing the service.



SG&A stands for Sales, General and Administrative. Many companies use the phrase operating expenses to mean the same thing. Others call it overhead. It is another category of expenses that include the costs to run the business. It includes the sales expenses, marketing, administrative costs (HR, IT, accounting, etc.), rent, utilities, and so on.



EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA is a measure that looks at earnings before the non operational and non cash expenses are subtracted. So, it is a quick way to measure how a company is managing all of the components of its business. And, it is a long term measure of cash flow.

Example

Book Excerpt


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