What term refers to the amount a retailer pays the supplier for merchandise it buys and sells?

The term that refers to the amount a retailer pays the supplier for merchandise it buys and sells is known as the Cost of Goods Sold (COGS). COGS specifically accounts for the direct costs attributable to the production of the goods that a company sells, including the purchase price of the products from suppliers, plus any additional costs essential to get the goods ready for sale, such as shipping and handling.

Understanding COGS is crucial for retailers as it impacts the company's profitability. It provides a clearer picture of the expenses incurred in obtaining inventory, which, in turn, helps in assessing the gross profit when subtracted from sales revenue. In financial reporting, COGS is a pivotal metric and is often used in various performance metrics to evaluate business efficiency and health.

While the selling price represents the amount customers pay, and gross profit is derived from subtracting COGS from sales revenue, it is the COGS that directly ties to what the retailer pays the supplier for the merchandise. Market value, on the other hand, typically refers to the current price at which an asset can be bought or sold in a market, which is not directly relevant to the transaction between the retailer and the supplier.

Thus, defining COGS accurately is essential