What does the term 'cost of goods sold' (COGS) refer to?

The term 'cost of goods sold' (COGS) specifically refers to the direct costs that are associated with the production of goods that a company sells during a specific period. This includes expenses for materials, labor directly involved in production, and any other direct costs that can be attributed to the production of those goods. COGS is a key metric for understanding the direct costs tied to generating revenue from sales, as it helps assess a company's gross margin and overall profitability.

When looking at the other options, marketing expenses, employee salaries that are not directly involved in production, and profits concern different aspects of financial performance. Marketing expenses are related to promoting products but do not necessarily reflect the cost of actually producing those goods. Total employee salaries could include a wide range of staff that contribute to the business but are not directly relevant to the production of goods. Lastly, profits made from sales are calculated after deducting COGS and other expenses, so they do not represent costs at all.