The Cost of Goods Sold Ratio, often referred to as the COGS ratio, is a metric used in financial analysis to measure the efficiency with which a company is utilizing its resources. This ratio is calculated by dividing a company’s cost of goods sold (the costs associated with acquiring, developing, and producing a product or service) by its total sales revenues. A high COGS ratio indicates that the business has overspent on producing and selling its goods, while a low ratio signals efficient use of resources and higher profits. Analyzing the COGS ratio helps investors and owners to better understand a company’s financial performance and make strategic decisions about its future.