I notice that some financial reports miss gross profit or cost of revenue.
This often happens in Software companies. Does this mean the cost of revenue is zero?
I attached a financial report for reference.
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Sign up to join this communityI notice that some financial reports miss gross profit or cost of revenue.
This often happens in Software companies. Does this mean the cost of revenue is zero?
I attached a financial report for reference.
The intent of your question seems misguided - you are under the impression that all companies report their financial statements in the same fashion. Rather, different companies report their financial statements in the way applicable to their industries, within relevant accounting standards.
You state in a comment that even if COS is a mere 1% of sales, it should be listed... but why?
If a company has $1B of revenue, does it really impact decision making of stakeholders [the point of financial statements] to see $10M classified as COGS instead of buried within operating costs? What if COS is .1%? Would it be valuable to see $1M listed as COS?
In particular, COS is most useful as a classification when it is an indicator of costs directly proportionate to revenue. ie: if Microsoft sells 2x as many Windows licenses next year, would it actually incur 2x 'COS'? For software, revenue can be completely unrelated to any particular line item, with minimal additional overhead - purely just more people clicking 'buy' and gaining access to already-produced lines of software.
You have tripped over the answer in your question - for some companies, like in software sales, physical cost of sales is inconsequential / immaterial relative to the remainder of operations.
Does this mean the cost of revenue is zero?
Probably not, but it may be insignificant (e.g. < 1% of gross profit). If the software is completely online (e.g. no CDs or packaging) then I could see a very small COGS, and all costs would be indirect (salaries, R&D, advertising, etc.). It's also possible that the company does not allocate direct labor (if there is any) to gross profit.
Depending on what you're using gross profit for, you might be okay using just Revenue, but be sure to watch this company to make sure it isn't an outlier that skews your results.
COR is "the total cost of manufacturing and delivering a product or service to consumers".
For a software company, that seems to be Engineering and product development
(the manufacturing) plus maybe Customer operations
(if that's delivering the product to the consumer).