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GuruFocus has detected 5 Warning Signs with Brocade Communications Systems Inc \$BRCD.
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Cost of Goods Sold
\$858 Mil (TTM As of Jan. 2017)

Brocade Communications Systems Inc's cost of goods sold for the three months ended in Jan. 2017 was \$214 Mil. Its cost of goods sold for the trailing twelve months (TTM) ended in Jan. 2017 was \$858 Mil.

Cost of Goods Sold is directly linked to profitability of the company through Gross Margin. Brocade Communications Systems Inc's Gross Margin for the three months ended in Jan. 2017 was 63.14%.

Cost of Goods Sold is also directly linked to Inventory Turnover. Brocade Communications Systems Inc's Inventory Turnover for the three months ended in Jan. 2017 was 2.88.

Definition

Cost of goods sold (COGS) refers to the Inventory costs of those goods a business has sold during a particular period.

Brocade Communications Systems Inc Cost of Goods Sold for the trailing twelve months (TTM) ended in Jan. 2017 was 172.995 (Apr. 2016 ) + 233.822 (Jul. 2016 ) + 236.985 (Oct. 2016 ) + 214.34 (Jan. 2017 ) = \$858 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Explanation

Cost of Goods Sold is directly linked to profitability of the company through Gross Margin.

Brocade Communications Systems Inc's Gross Margin for the three months ended in Jan. 2017 is calculated as:

 Gross Margin = (Revenue - Cost of Goods Sold) / Revenue = (581.463 - 214.34) / 581.463 = 63.14 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A company that has a moat can usually maintain or even expand their Gross Margin. A company can increase its Gross Margin in two ways. It can increase the prices of the goods it sells and keeps its Cost of Goods Sold unchanged. Or it can keep the sales price unchanged and squeeze its suppliers to reduce the Cost of Goods Sold. Warren Buffett believes businesses with the power to raise prices have moats.

Cost of Goods Sold is also directly linked to another concept called Inventory Turnover:

Brocade Communications Systems Inc's Inventory Turnover for the three months ended in Jan. 2017 is calculated as:

 Inventory Turnover = Cost of Goods Sold / Average Inventory = 214.34 / 74.4035 = 2.88

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Inventory Turnover measures how fast the company turns over its inventory within a year. A higher inventory turnover means the company has light inventory. Therefore the company spends less money on storage, write downs, and obsolete inventory. If the inventory is too light, it may affect sales because the company may not have enough to meet demand.

Usually retailers pile up their inventories at holiday seasons to meet the stronger demand. Therefore, the inventory of a particular quarter of a year should not be used to calculate inventory turnover. An average inventory is a better indication.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Brocade Communications Systems Inc Annual Data

 Oct07 Oct08 Oct09 Oct10 Oct11 Oct12 Oct13 Oct14 Oct15 Oct16 COGS 575 607 919 860 864 855 814 745 735 829

Brocade Communications Systems Inc Quarterly Data

 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 COGS 187 187 174 180 195 185 173 234 237 214
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