Cost of Goods Sold (COGS) Inventory is an accounting metric used to track the cost of items that have been sold by a business. It’s calculated by taking the total cost of goods purchased or produced and subtracting the cost of any remaining inventory on hand. This calculation provides businesses with an accurate measure of how much they have spent on merchandise, which is necessary for making sound financial decisions. By understanding the costs associated with their inventory, businesses can make smarter purchasing choices and ultimately propel their company toward success.