![]() From there, the calculation of the gross profit is straightforward, since it is the difference between the projected net revenue and the COGS. COGS as % of Revenue: In the COGS approach, a company’s COGS margin assumptions drive the forecast, as the cost of goods sold (COGS) line item is directly projected by multiplying the COGS percent assumptions by revenue in each corresponding period. ![]() Considering the fact that management guidance on future profitability (and the industry averages and projections to reference from 3rd party data platforms and equity research reports) is presented far more often in terms of the anticipated gross profit margin, the gross margin method tends to be more prevalent. Given the inverse relationship between gross profit and COGS, the difference between gross profit and revenue results in cost of goods sold (COGS).
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