Cost of Sales, also known as the ‘Cost of Goods Sold’, is a key line-item on the Income Statement of businesses that sell goods or services. It represents all the costs associated with producing and selling products or services – from the purchase price of materials and labor to distribution costs and marketing expenses. It’s also used to calculate what’s often referred to as the Gross Profit Margin – an important indicator of a business’s profitability and efficiency. In short, it’s one of the most important components of a business’s income statement – and a crucial element in determining its success.