Cost of products sold is another name for cost of goods sold (COGS), the total direct cost of the goods a company sold during a reporting period. It includes the materials, direct labour and manufacturing overhead that went into those products, or for a retailer the purchase cost of the goods resold. The main entry explains the calculation and how COGS relates to inventory.
Where you will see this label
Accounting standards do not dictate the exact wording of income statement lines, so companies choose their own. Manufacturers, especially makers of branded consumer goods, often use "cost of products sold" because it fits the way they describe what they sell. Retailers tend to write "cost of merchandise sold" or "cost of sales", while service and technology companies often use "cost of revenue" or cost of sales.
Whatever the label, the figure is subtracted from net sales on the income statement to give gross profit. It is calculated in the same way: opening inventory, plus purchases or production costs for the period, minus closing inventory.
Analysts comparing companies should check what each one includes in the line. Some put distribution, warehousing or depreciation of factory equipment into cost of products sold, while others report those costs further down the income statement, which can change gross margins noticeably even when the businesses are similar.